Produced by | Bullet Finance
Author | Meng Xiangna
Edit | Hu Fangjie
American Editor | Qianqian
Audit | Ode
After experiencing the myth of wealth creation, nucleic acid testing-related companies are now calm again.
On April 12, Shengxiang Biotech, the "first stock in the fight against the epidemic", released a performance report for the first quarter of 2024, in which the company expects to achieve operating income of 391 million yuan in the first quarter of 2024, a year-on-year increase of 100%, and a net profit attributable to the parent company of 81.49 million yuan, a year-on-year increase of 36%. However, the rapid growth of this performance is based on the sharp decline in performance in the same period of 2023.
According to the company's previously released 2023 performance report, in 2023, Shengxiang Bio's revenue and net profit attributable to the parent company will decline by more than 80% year-on-year.
Behind the decline in performance is the reality that the dividend period of new crown detection reagents has passed. Shengxiang Biotech said that the decline in performance in 2023 is mainly due to the sharp decline in demand for new crown nucleic acid detection reagents and instruments and the decline in related business revenue.
On January 28, 2020, Shengxiang Bio's new crown nucleic acid detection kit product was approved for marketing, and it is one of the first 6 companies in China to be approved for marketing of new crown detection products. In August of the same year, Shengxiang Biotech was listed on the Science and Technology Innovation Board.
With the halo of "the first stock to fight the epidemic", the opening price of Shengxiang Biotechnology on the first day of listing was 151 yuan per share, which was twice as high as the issue price of 50.48 yuan per share. After the listing, the share price of Shengxiang Biotechnology fell sharply. On April 24, it closed at 18.7 yuan per share, down more than 80% from the closing price on the first day of listing, and the total market value was only 11 billion yuan.
In the post-epidemic era, has Shengxiang Biotech found a second growth point, and can the "first anti-epidemic stock" reverse the decline in stock prices?
1. From the verge of bankruptcy to "getting rich overnight"
Throughout the development of Shengxiang Biology, it is inseparable from one person, that is, the founder Dai Lizhong.
Born in Hunan, Dai Lizhong graduated from the Department of Chemistry of Peking University and went to Princeton University in the United States in 1993 to study for a master's and doctoral degree in biochemistry. After that, he studied as a postdoctoral fellow in biochemistry at the Massachusetts Institute of Technology, and after graduation, he worked for Gen-Probe, the largest nucleic acid reagent company in the United States, in 2000.
In 2008, Dai Lizhong gave up the favorable conditions abroad to return to China and founded Shengxiang Co., Ltd. (the predecessor of Shengxiang Biology). But the good times did not last long, and the original shareholder Li Chikang dragged Shengxiang Biotechnology into a predicament.
From 2011 to 2012, Li Chikang borrowed 240 million yuan in the name of his affiliated companies Boya Eye Hospital and Xiangyu Food. Among them, it borrowed a total of 134 million yuan from the Hunan Branch of the Bank of Communications and the Changsha Yuhua District Branch of the Agricultural Bank of China, privately engraved the company's seal, forged the signature of the legal representative Dai Lizhong, and signed a "guarantee contract" with Chang'an Trust in the name of Shengxiang Co., Ltd. for a trust loan of 110 million yuan from Boya Eye Hospital, which is one of the multiple mortgages and guarantors.
In 2013, Li Chikang was investigated by the Public Security Bureau on suspicion of illegally absorbing public deposits, and the debts owed by his related parties were unable to be repaid, and creditors successively launched a recovery from Shengxiang Biotechnology.
Debts of up to hundreds of millions of yuan have directly led to the seizure, seizure or freezing of many assets such as land, real estate, and deposits of Shengxiang Biological, and Dai Lizhong has also assumed huge liabilities in order to solve these problems.
In order to get rid of the debt predicament, Shengxiang Biotech began to promote debt restructuring in May 2017. Under the joint promotion of shareholders and government departments, until 2018, the debt risk of Shengxiang Biotechnology was eliminated. In 2018, Shengxiang Biotech achieved a net profit of 6.76 million yuan, successfully turning losses into profits.
Before 2020, Shengxiang Bio's revenue was less than 400 million yuan. In January 2020, Shengxiang Biotech's new coronavirus nucleic acid detection kit was approved for marketing, becoming one of the earliest approved companies. A month later, Shengxiang Biotech started the road to listing, and in only half a year, it completed a series of preparations for listing. In August of the same year, Shengxiang Biotech was listed on the Science and Technology Innovation Board.
This year, Shengxiang Bio's performance exploded, with revenue and net profit reaching 4.763 billion yuan and 2.617 billion yuan, a year-on-year increase of 1204% and 6528%. In 2022, Shengxiang Bio's revenue will further climb to 6.45 billion yuan, a record high.
However, with the receding of the epidemic, the performance of Shengxiang Biology began to plummet. In 2023, Shengxiang Bio's revenue will be 1 billion yuan, a year-on-year decrease of 84%, only less than half of that in 2022, and the net profit attributable to the parent company will be 360 million yuan, a year-on-year decrease of 81%. The net profit after deducting non-profits was only 68.09 million yuan, down 96% year-on-year.
In the past four years, the net profit of Shengxiang Biotechnology has also shown a downward trend year by year. Taking 2022 as an example, although Shengxiang Bio's revenue is growing, its net profit will decline by 13.6% year-on-year to 1.937 billion yuan. This is mainly due to the fact that Shengxiang Biotech has increased its investment in sales expenses and R&D expenses. In 2022, the company's R&D expenses and sales expenses will be 330 million yuan and 730 million yuan respectively, a year-on-year increase of 77% and 87%.
The most critical thing is that in the first three quarters of 2023, the net cash flow from operating activities of Shengxiang Biotech turned from positive to negative, with a net outflow of 170 million yuan.
However, after several years of rapid development, Shengxiang Bio's monetary funds are also growing, from 99.16 million yuan at the end of 2019 to 3.1 billion yuan at the end of 2022.
However, relying on old money is not a long-term solution. In the case of declining performance, how will Shengxiang Biology bail out?
2. The "second growth curve" is long and resistant
At the end of 2022, Shengxiang Biotech started the strategic layout of "second entrepreneurship".
In the domestic market, the company continued to promote marketing reform, strengthened the construction of marketing team, focused on strategic production line fields such as respiratory tract and reproductive tract infections, blood screening, hepatitis, etc., and actively explored the field of gene sequencing to accelerate the cultivation of the second growth curve.
In terms of the international market, it will focus on expanding to non-COVID business, and deeply cultivate international markets such as France, Indonesia, and Thailand.
In addition, Shengxiang Bio's strategy of creating an in vitro diagnostic whole ecology is also in progress.
In the first half of 2023, Shengxiang Biotech will invest in the establishment of Hunan Xiangjiang Shengxiang Biological Industry Fund, with an initial fundraising scale of 400 million yuan, which will be used to invest in upstream and downstream related industries in the biomedical industry chain, including technologically advantageous enterprises in the fields of in vitro diagnostics, biomedicine, biotechnology, and health.
In June 2023, Shengxiang Biological Joint Industry Fund signed an investment contract with Shenzhen Ansai to make a comprehensive strategic layout in the field of immunodiagnosis, especially chemiluminescence.
Judging from the results, the respiratory business segment may be one of the fastest-growing business segments of Shengxiang Biology.
In 2023, the operating income of Shengxiang Bio's respiratory products will exceed 400 million yuan, a year-on-year increase of 680%. Shengxiang Biotechnology said that further breakthroughs have been made in the fields of HPV, blood screening, and sequencing. However, after losing the key business dividend of nucleic acid detection reagents, the "second increase to the curve" has not been able to carry the banner, and the revenue of respiratory products accounts for less than 50% of the revenue.
Previously, Shengxiang Biology also invested in companies such as Zhenmai Biology in the field of gene sequencing and Shengpet Biology in the field of pet testing, but the effect was not ideal. From the perspective of investment income, these investment projects have shown floating losses.
According to the 2023 semi-annual report, the investment profit and loss recognized under the equity method was -7.298 million yuan. Among them, the floating loss generated by the investment in Zhenmai Biotech reached 5.888 million yuan.
(Photo / Shengxiang Biotech 2023 semi-annual report)
Zhenmai Biotech, formerly known as Shenzhen Hanhai Gene Biotechnology Co., Ltd. (Hanhai Gene), is founded by He Jiankui, a former Southern University of Science and Technology teacher who became known to the world at the end of 2018 due to the "gene-edited baby" incident. After falling into a public opinion storm due to the "gene-edited baby" incident, the industrial and commercial registration shows that Hanhai Gene changed its name to "Zhenmai Bio" in August 2019.
In 2021, Shengxiang Biotech purchased 14.76% of Zhenmai Biotech's equity at a premium of 250 million yuan, 22 times the premium, and also received an inquiry letter from the Shanghai Stock Exchange.
After the acquisition was officially completed, Zhenmai's net profit continued to lose. According to the announcement, for the whole year of 2022 and the first half of 2023, the operating income of Zhenmai Biotech will be 75.0049 million yuan and 41.809 million yuan respectively, and the net profit will be -94.3653 million yuan and -41.3467 million yuan.
This investment, so far, has not been successful.
3. The market value evaporated by 30 billion, and shareholders reduced their holdings many times
However, under the dual pressure of performance and stock price, the shareholders of Shengxiang Biotechnology are frequently reducing their holdings of the company's shares.
According to incomplete statistics, in the past four years, Suzhou Lirui has reduced its holdings by 533 million yuan, Anhui Zhidao has reduced its holdings by 3.17 billion yuan, and Zhu Jinwei has reduced its holdings by 244 million yuan.
It is worth mentioning that in the process of reducing shareholdings, shareholder Zhu Jinwei twice violated the commitment to reduce the shareholding reduction price not lower than the issue price, and was criticized by the Shanghai Stock Exchange. After that, Zhu Jinwei compensated the company for the difference in the value of his reduction of the corresponding shares, and the incident was calmed down.
Shengxiang Biotech and its management have improved its stock price and investor confidence through share repurchases.
At the time of the large reduction of shareholders' holdings, Dai Lizhong, chairman and actual controller of Shengxiang Biotechnology, increased his holdings of the company's shares many times. In January 2022, Dai Lizhong increased his holdings of 1.5842 million shares of the company, involving an amount of 80.9883 million yuan. In September 2022, it increased its holdings by 494,500 shares again, amounting to 12.2816 million yuan. The total amount of the two increases was 93.2699 million yuan.
In February 2024, Shengxiang Biotech announced again that Dai Lizhong and his concerted actors intend to increase their holdings of the company's shares within 12 months from May 2024, with a total increase of not less than 50 million yuan and no more than 100 million yuan.
On October 9, 2023, Shengxiang Biotech repurchased a total of 9,835,800 shares of the company, accounting for 1.67% of the company's total share capital, and paid a total amount of 199 million yuan.
But even so, Shengxiang Biotech has not reversed the decline in stock prices. As of the close of trading on April 24, Shengxiang Biology reported 18.7 yuan per share, with a market value of 11 billion yuan, and the market value evaporated 30 billion yuan from the first day of listing.
In addition, in order to attract and retain the company's core management, technical and business talents, Shengxiang Biotech plans to launch the second phase of the equity incentive plan in 2023.
Among them, the company intends to grant 6,758,800 shares to 236 incentive recipients for the first time at a price of 9.26 yuan per share, accounting for 84.49% of the total number of restricted shares to be granted in the incentive plan, and another 1,241,200 shares are reserved, with a total of 8 million restricted shares to be granted.
In terms of performance appraisal, Shengxiang Biotech has set up performance appraisal indicators at the company level and at the individual level. Among them, at the company level, taking the four fiscal years from 2024 to 2027 as the performance appraisal period, the proportions of the four vesting periods corresponding to the first grant of restricted shares are 12.5%, 27.5%, 30% and 30% respectively.
(Photo / Shengxiang Biological Announcement)
In the first vesting period, the performance assessment target of Shengxiang Biotech is to deduct non-net profit of not less than 200 million yuan in 2024.
In the first quarter of 2024, Shengxiang Bio's revenue was 390 million yuan, a year-on-year increase of 100%. The net profit after deducting non-profits was 74.33 million yuan, a year-on-year increase of 1978%.
From the current point of view, in the first quarter of 2024, Shengxiang Biotechnology ushered in a "good start". The net profit after deducting non-profits in the first quarter accounted for 38% of the annual target assessment value. However, Shengxiang Biology is still facing a lot of pressure, and it will take time to witness whether the management can complete the annual performance appraisal target.
For Shengxiang Biology at this stage, how to face the dilemma of a cliff-like decline in performance after the disappearance of the epidemic dividend and find a new performance growth point is still the most difficult task at present.
*The title image in the article comes from: Camera.com, based on VRF protocol.