Sichuan Jinjiang Electronic Medical Device Technology Co., Ltd. (hereinafter referred to as "Jinjiang Electronics") is a medical device company that is sprinting for the fifth set of listing standards on the Science and Technology Innovation Board, mainly engaged in the research and development, production and sales of cardiac electrophysiology diagnostic equipment products, with CITIC Securities as the sponsor.
Jin Jiang Electronics' IPO application was accepted in mid-June 2023, and Jin Jiang Electronics recently updated the submission of relevant financial information. The first financial reporter noticed that compared with when Jinjiang Electronics' IPO was accepted, the company's IPO fundraising was reduced by 700 million yuan, the sponsor representative was changed, and the market questioned the lack of core technology.
The fifth set of listing standards for the STAR Market does not set hard financial indicators. Since the promulgation of the rules, the Shanghai Stock Exchange has strictly controlled the fifth set of listing standards on the STAR Market. Since the second half of 2023, the number of companies listed using this standard has fallen to a freezing point. Industry insiders believe that this is not unrelated to the change in the attitude of regulatory review, and the sustained profitability of enterprises has been mentioned in a very important position.
"For now, even with the fifth set of criteria, companies that continue to lose money are unwelcome. A head investment bank sponsor told reporters. Jinjiang Electronics' performance has suffered losses twice in the past three years, and the scale of operating income is only about 60 million yuan.
The performance continued to lose money, and the amount of funds raised was significantly reduced
Cardiovascular medical devices are the third largest sub-industry of medical devices in the world, and with the aging of the population, the penetration rate of cardiac electrophysiological surgery in China is expected to increase. According to Frost &Sullivan research data, the global cardiac electrophysiology market is expected to reach 32.45 billion US dollars in 2032, and the Chinese market will reach 41.973 billion yuan.
Under the background of the expected growth rate of the industry, the listing of Jinjiang Electronics' Science and Technology Innovation Board launched an impact. According to the prospectus, Jinjiang Electronics is a company focusing on the R&D, production and sales of high-end innovative medical devices in the field of cardiac electrophysiology diagnosis and ablation.
Within six months of Jinjiang Electronics' IPO acceptance, the review was at a standstill, and the first round of inquiries has not been disclosed. The company recently updated and submitted relevant financial information, and the amount of funds originally planned to raise was also reduced from 2.691 billion yuan to 1.95 billion yuan, a reduction of about 741 million yuan, accounting for about 27.54% of the original planned fundraising.
Jinjiang Electronics originally planned to use 2.691 billion yuan for three major projects: medical device R&D and technology center, medical device production base project, electronic marketing network and marketing capacity building, respectively, to invest 958 million yuan, 900 million yuan, 333 million yuan, and the remaining 500 million yuan to supplement working capital. According to the disclosure on the official website of the Shanghai Stock Exchange, the sponsor representatives of Jinjiang Electronics were originally Hu Chaofeng and Zhao Dongtian of CITIC Securities.
The amount of funds raised and investment projects of the company to be listed on the stock market shall be compatible with the existing production and operation scale, financial situation, technical level and management ability, ability to obtain orders in hand and future orders, market space, etc. Judging from the past cases of downgrading fundraising on the STAR Market, some issuers have reduced the amount of funds to be raised in the face of issues such as future production expansion, capital investment planning and arrangement, and whether the new production capacity can be digested.
However, it is rare for Jinjiang Electronics to take the initiative to reduce the amount of funds raised before completing the first round of inquiries, which may be related to the company's performance loss.
According to the data, from 2020 to 2022, Jinjiang Electronics' net profit suffered two losses, with operating income of 41.339 million yuan, 60.6159 million yuan, and 59.159 million yuan respectively, net profit of 24.7252 million yuan, -16.5897 million yuan, and -1.0424 million yuan respectively, and net cash flow from operating activities of 1.8814 million yuan, -29.4652 million yuan, and -75.0258 million yuan respectively, and the scale of cash outflow has expanded year by year. The company said in the prospectus that it could not guarantee profitability in the short term.
Jinjiang's main products are divided into three categories: cardiac electrophysiology diagnostic products, cardiac electrophysiology treatment products and pain management products. The multi-channel physiological recorder for cardiac electrophysiology diagnosis is the main sales product of Jinjiang Electronics, which is mainly used to collect ECG signals on the surface and heart of patients and output visual ECG data to assist surgeons in rapid arrhythmia diagnosis. During the reporting period, the company's multi-channel physiological recorder achieved revenue of 31.7355 million yuan, 44.366 million yuan and 39.6741 million yuan respectively, accounting for 80.84%, 74.57% and 68.16% of revenue respectively.
The listing criteria selected by Jinjiang Electronics for this IPO are the listing criteria stipulated in Article 2.1.2, Paragraph 1 (5) of the Listing Rules of the Science and Technology Innovation Board: the expected market value is not less than RMB 4 billion, the main business or products need to be approved by the relevant state departments, the market space is large, and phased results have been achieved. Previously, the document issued by the Shanghai Stock Exchange "Guidelines for the Application of the Review Rules for the Issuance and Listing of the Science and Technology Innovation Board of the Shanghai Stock Exchange No. 7 - The Fifth Set of Listing Standards for Medical Device Enterprises" pointed out that the issuer should comply with the national medical device science and technology innovation strategy, and should have obvious technical advantages, have advanced technologies such as key core technologies, and have outstanding scientific and technological innovation capabilities and the ability to transform scientific and technological achievements.
The multi-channel physiological recorder is not an exclusive feature of Jinjiang Electronics. Among the listed companies, Huitai Medical (688617. SH), microelectrophysiology (688351. SH) has generated substantial revenue from its performance, and the criteria for the listing of microelectrophysiology are also the fifth set.
The core products of Jinjiang Electronics, such as magnetoelectric positioning three-dimensional mapping system, cardiac pulsed electric field ablation instrument and supporting catheter, belong to the equipment and consumables involved in cardiac electrophysiological surgery. The "3D mapping system" also appears in Huitai Medical's regular report, and the company said: "The innovative integration of the 3D mapping system, multi-channel recorder, and stimulator into an integrated platform has greatly improved the efficiency of surgery." ”
The fifth set of standards does not emphasize financial indicators and does not set specific requirements for revenue and net profit, emphasizing that the core technology of the company to be listed on the stock market should be in line with the national medical device science and technology innovation strategy, and support the "hard technology" medical device enterprises that have not yet formed a certain revenue scale to be issued and listed on the science and technology innovation board.
It can be seen from the recent case of Huamai Tech's withdrawal of the IPO of the Science and Technology Innovation Board that the technical advantages, technology sources, phased achievements and market space of the applicant enterprises are the key aspects of regulatory attention. "The fifth set of listing standards does not set hard financial standards, and a number of pharmaceutical and medical device companies have been listed before 2023. Since the second half of 2023, the regulator has paid great attention to the sustained profitability or commercialization ability of companies listed on the fifth set of standards. Sustained losses are unwelcome at the moment. A sponsor representative of a leading brokerage told reporters.
Institutions raided into shares, and the actual controller's family has cashed out 269 million
Founded in 2002, Li Chuya, one of the founders of the company, led the research and development of the company's cardiac electrophysiology equipment and the company's overall research and development as a core technician.
As of the end of the reporting period, the controlling shareholders and joint actual controllers of Jinjiang Electronics were Li Chuwen and Li Chuya, and the actual controllers acted in concert with Li Chuyu, Li Chusen and Li Chuwu, and the five were brothers. Li Chuwen and Li Chuya directly hold 35.0859% of the company's shares together, and Li Chuyu, Li Chusen and Li Chuwu directly hold 1.5784%, 12.1141% and 4.1719% of the company's shares respectively. That is, Li Chuwen and Li Chuya control a total of 52.9503% of the voting rights of the company, Li Chuwen is the chairman and general manager, and Li Chuya is the director and deputy general manager.
Li Chuwen is the most educated of the five brothers, graduated from Beijing Medical University (now Peking University Health Science Center) with a master's degree. According to the prospectus, Li Chuya worked in a research institute of the General Staff in her early years, served as an assistant and engineer, deeply involved in the research and development of military communication equipment, and participated in the research and development of China's first fully digital multi-channel physiological recorder in 1997. In addition, Li Chuyu and Li Chusen both worked in a certain unit as soldiers.
The shareholding structure shows that, in addition to the Li brothers, Shenzhen Salubris Medical Devices Co., Ltd. (hereinafter referred to as "Salubris Devices") directly holds 16.68% of the shares of Jinjiang Electronics, which is a holding subsidiary of Salubris (002294.SZ), an A-share listed company.
From 2020 to 2022, in the first two years of its listing, Jinjiang Electronics has implemented a total of five equity transfers and three capital increases, and through a series of equity transfers, institutional shareholders have entered the market to raise the company's valuation, and the Li family has cashed out part of its equity before listing, with an amount of more than 200 million yuan.
According to the disclosure, in January 2020, Li Chusen transferred his 2% stake in Jinjiang Electronics Co., Ltd. (corresponding to the capital contribution of 227,268 yuan) to Jinning Partnership at a price of 9 million yuan, corresponding to the valuation of Jinjiang Electronics of 450 million yuan.
At the end of 2020, Salubris transferred its 19.32% stake to Salubris Devices, a holding subsidiary. At the end of 2021, when Jinjiang Electronics made its third equity transfer and second capital increase, Hillhouse Capital also began to enter the market.
According to the prospectus, in December 2021, Li Chusen and Salubris Instruments made two equity transfers to Hillhouse Qirui and Hillhouse Qiyi respectively, with a transfer price of 306.03 yuan and 306.04 yuan per 1 yuan of registered capital, with a total share ratio of 2.7776% and a transfer price of 25 million yuan each, totaling 100 million yuan. After the completion of the transfer, Hillhouse Qirui and Hillhouse Qiyi increased their capital to Jinjiang Electronics by a total of 200 million yuan at a price of 340.04 yuan/1 yuan of registered capital in the same month. Two transactions in the same month increased the valuation of Jin Jiang Electronics by 11.11%.
As of the end of the reporting period, Hillhouse Qirui directly held 3.6174% of the shares of Jinjiang Electronics, and Hillhouse Qiyi directly held 3.6174% of the shares, holding a total of 7.2348% of the company's shares, and the two shareholders were acting in concert.
In 2022, the Li family cashed out again. In January of that year, Jinjiang Electronics carried out the fourth equity transfer, and three institutions, Weixin Medical, Songyuan Fund and Huimei Kangxin, received a total of 4.3478% of the shares from the "Li Five Brothers" and Chen Youhui at a price of 372.42 yuan/registered capital, with a total transfer price of 200 million yuan. At this time, the valuation of Jinjiang Electronics has reached 4.6 billion yuan.
Subsequently, in the fifth equity transfer in April 2022, Li Chuyu transferred his capital contribution of 53,700 yuan from Jinjiang Electronics Co., Ltd. to Yuanheng Phase VI at a price of 20 million yuan. In July 2022, four institutions, Xinshi Xinxing, Jianda Qianxin, Wenjiang Venture Capital, and Wutong Jushi, carried out the third capital increase of Jinjiang Electronics, with a capital increase price of 388.5 yuan per share, and the post-investment valuation of Jinjiang Electronics was close to 5 billion. The last capital increase came less than a year after the company's application for listing on the STAR Market was accepted.
In two years and seven months, the valuation of Jinjiang Electronics soared by 10 times, and while a number of institutions entered the market, the Li family, the actual controller, also realized some cash-out.
Specifically, Li Chusen cashed out 9 million yuan, 50 million yuan, and 130.2 million yuan in three equity transfers in January 2020, December 2021, and February 2022, with a total of 189.2 million yuan, Li Chuya, Li Chuwu, Li Chuyu and others cashed out 7 million yuan to 23 million yuan in January 2022 transactions, and Li Chuyu cashed out 20 million yuan in the fifth equity transfer in April 2022. So far, the Li family has cashed out 269 million yuan in more than two years.
Jinjiang Electronics' proposed fundraising is 1.95 billion yuan, according to the number of public shares not less than 25% of the total share capital after the issuance, the company's issuance valuation will reach 7.8 billion yuan, if the original plan to raise 2.691 billion yuan, its issuance valuation will reach 10.764 billion yuan, an increase of about 17 times and 24 times respectively compared with the beginning of 2020.