In May 2022, Sanjiu acquired 28% of the shares held by the former controlling shareholder of KPC at a transfer price of 13.67 yuan, with a total amount of about 2.9 billion yuan.
As one of the leading traditional Chinese medicine companies, China Resources Sanjiu has always had an acquisition strategy, so it is expected to achieve a strong alliance with KPC, even if KPC's performance in 2022 and since 2023 is not good, the company's stock price has doubled and exceeded the transfer price at that time.
At the same time, China Resources Sanjiu's revenue increased significantly, and its market performance was basically the same as that of KPC.
Just recently, there was another large acquisition in the pharmaceutical industry, which occurred between Mindray Medical, a leading medical device company, and Huitai Medical, a leading medical consumables company.
It is agreed that the transfer price of Huitai Medical is 471.12 yuan per share, and the total amount of 24.61% equity corresponding to the transfer reaches 6.652 billion yuan.
So, can Mindray Medical and Huitai Medical replicate the situation of Sanjiu and KPC in the future?
1. Let's look at the target company first, Huitai Medical
Leading product innovation and outstanding performance growth.
The first thing to say is that Huitai Medical is an innovative medical device company with the advantage of domestic substitution and a prominent market competitive position.
The company's main cardiovascular equipment direction, electrophysiology and vascular intervention (including coronary artery, peripheral blood vessels) related consumables and equipment, mainly used for arrhythmia, cardiovascular disease diagnosis and treatment, the status quo of the industry is that because the development of medical devices in mainland China started late, and the product technical barriers are high, so these two fields have been occupied by foreign manufacturers for a long time.
In the field of electrophysiology equipment, the localization rate in mainland China is only about 10%-13%, and Huitai is the domestic leader with the largest market share, and its products have broken the monopoly of foreign countries, and the product layout is more complete than that of other domestic manufacturers.
(2020 China Cardiac Electrophysiology Device Market Competition Pattern)
In addition, in the field of coronary interventional devices, the top five foreign brands occupy about 70% of the market share, and Huitai's share is not high, but it has also achieved the leading level of domestic production.
Therefore, in recent years, benefiting from the domestic substitution dividend under the policy support, as well as the launch of innovative products, the company's performance has achieved rapid growth.
From 2019 to 2022, the compound growth rate of operating income reached 49.72%, the compound growth rate of net profit reached 117.57%, and the net profit increased by 20 times in 4 years.
And it is worth mentioning that Huitai is also immune to the centralized procurement of the medical device industry, and its performance has not been affected at all, mainly because the centralized procurement can promote domestic substitution, so that product sales have increased significantly, and the industry in which the company is located is still in the growth stage, and the product penetration rate is low.
In 2022, the company's electrophysiology products will participate in the alliance centralized procurement in 27 provinces, and the coronary access products will also participate in the centralized procurement of multiple provinces from 2020 to 2022.
Therefore, in this context, Huitai has basically realized the exchange of volume for price, and the overall scale is expected to grow rapidly with the increase in the number of surgeries.
The market size of Huitai's products mentioned above is continuing to grow, among which the electrophysiology and peripheral interventional device market is growing particularly fast, and the industry growth rate of the electrophysiology market is expected to be 42.29% from 2020 to 2024, reaching 21.11 billion yuan in 2024;
It is estimated that the industry growth rate of the peripheral interventional device market size from 2021 to 2026 will be 17.79%, reaching 10.185 billion yuan by 2026.
The relatively mature market size of coronary interventional devices is expected to reach 10.36 billion by 2024, with a CAGR of 10.9% from 2019 to 2024.
Although the development of different segments is different, from the current scale of Huitai Medical, the company obviously still has a high growth ceiling.
(Screenshot from the 2022 Huitai Medical Annual Report, unit: yuan)
2. Let's look at the acquirer, Mindray Medical
Expand the market territory and create new growth poles.
As of 2022, the company's revenue has reached 30.366 billion yuan, involving only three major medical equipment product areas (life information and support, medical impact, and in vitro diagnosis), and the company has experienced about 25 years for the development of these three types of products.
In the third quarter of 2023, there was a revenue growth rate of 11.18%, which is not the case since Mindray went public in 2018.
So now the acquisition of the holding of Huitai is to prepare for future growth, some friends may question, after spending so much money, the shareholding ratio is actually less than 30%, and finally the revenue has increased, but the profit does not necessarily increase much, is it worth it?
First of all, in terms of profit growth, I think it can be considered that Huitai Medical's gross profit margin is higher, so if it is consolidated in the financial statement, Mindray's gross profit margin will increase, and it can also provide the possibility of net profit margin growth, and if the net profit margin is increased, the net profit growth will be relatively stable.
Secondly, with the help of a larger platform, Mindray may be able to develop Huitai better, especially in terms of product exports (overseas markets) and product expansion, so as to achieve faster growth.
Mindray Medical's export proportion has always been relatively high, but Huitai has not yet achieved a large export scale, so if it faces overseas in the future, Huitai actually has more room for growth.
According to the data, in the entire cardiovascular device field, the global market size has reached 56 billion US dollars (more than 400 billion yuan), and the Chinese market size has also exceeded 50 billion yuan, ranking third in the medical device classification, second only to medical equipment and in vitro diagnostics.
In addition, in the future, in the context of the aging of the population, the cardiovascular market will continue to grow rapidly.
3. Finally, make a summary
Overall, based on the development of Huitai Medical and Mindray, Flying Whale believes that the acquisition of Mindray is precisely because of Huitai's growth, and in the future in the field of cardiovascular devices, Huitai Medical still has a lot of room for growth, so with the help of Huitai, Mindray can quickly enter this new track, and is also expected to empower the company's future growth.
In terms of potential, both are expected to be good in the future, Huitai has better growth, and Mindray tends to grow steadily and steadily.
In terms of price, it is necessary to combine expectations and the market, but also to look at the future.
The above is only used for the analysis of listed companies, and is not intended as specific investment advice.
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Source: Flying Whale Investment Research