Wang Duoyu in the medical field has shot again!
Mindray Medical voted 66500 million yuan won Huitai Medical 21With 12% equity, the former is a well-deserved brother of A-share medical devices, and the latter is the leading company with the highest stock price on the Science and Technology Innovation Board.
This merger and acquisition with a premium of 25% has become a hot spot in the capital market today, and the stock prices of Mindray Medical and Huitai Medical have stepped out of the trend of two days, and Mindray Medical has been on the road all day39%, while Huitai Medical**457%, the market sentiment is clear at a glance.
At such a downturn, Mindray Medical has made such a generous move, what kind of intentions are hidden behind it?
Is it expensive or not?
According to the announcement, Shenmai Holdings, a subsidiary of Mindray Medical, will sell about 66500 million yuan to acquire Huitai Medical 2112% equity. Cheng Zhenghui, the current controlling shareholder and actual controller of Huitai Medical, also promised to permanently and irrevocably give up the voting rights of the 10% shares of Huitai Medical that he still holds.
Mindray Medical, with a market value of 320 billion, is more familiar to the public. In the eyes of shareholders, this is the absolute leader in the medical device industry, comparable to the stable performance of Moutai, also known as "medical equipment Mao", and the net profit growth rate has remained above 20% in the past three years.
Huitai Medical, on the other hand, is much less well-known. According to the company's introduction, Huitai Medical focuses on two major business segments: electrophysiology and vascular intervention. To put it simply, it is a positioning examination and surgery for the cardiovascular field**.
In the three years since it landed on the Science and Technology Innovation Board in 2021, Huitai Medical's revenue has increased from 47.9 billion skyrocketed to 12 in 20226.1 billion yuan, and the net profit also increased from more than 70 million to 3400 million,It is the first domestic brother on the cardiovascular track.
Not long ago, Huitai Medical also released a rather "beautiful" performance forecast, which is expected to achieve a net profit of 5 net profit attributable to the parent company in 2023100 million to 56.5 billion yuan, an expected year-on-year increase of 4245% to 5781%。
As of January 29, Huitai Medical closed at 377 yuan, becoming the company with the highest stock price on the Science and Technology Innovation Board, leaving the second stock price of nearly 100 yuan.
Even though Huitai Medical's performance is so good, the merger still raises controversy over whether it is too expensive.
According to Mindray, the merger is not expensive.
Referring to the control transfer cases with a transaction size of more than 1 billion yuan on the Shanghai and Shenzhen stock exchanges since 2021, the average premium rate has reached 30%, of which the average premium rate of medical-related cases has reached 33%.
Referring to the transfer of control of the non-pharmaceutical healthcare sector in overseas markets with a transaction size of more than US$500 million in recent years, the average premium rate reached 34%.
Mindray Medical believes that the combined valuation of this transaction is 30.2 billion yuan, which corresponds to the premium rate of 25% of Huitai Medical's ** price on January 26, and the average price premium rate of 23% in the first 60 days of Huitai, which is not expensive.
However, it is worth noting that high premiums usually occur when the industry is booming, and the medical industry has been in a downturn for the past three years.
Referring to the CSI Healthcare Index, the valuation of the index has been declining in the past three years, and the price-earnings ratio quantile is lower than 87% of the time in history.
Mindray Medical did not take the opportunity to bargain, but won 21% of the equity at a premium of 25%, I have to say that it is still rich and capricious.
Someone with 2112% equity consideration 665.2 billion yuan, the acquisition valuation is 6652/21.12% = 31.5 billion yuan. Huitai Medical expects to achieve a net profit of 500 million yuan attributable to the parent company in 2023, and the acquisition of P E = 315 5 = 63 times.
From the perspective of static valuation, the acquisition** is indeed abnormally high.
However, at present, Huitai Medical's static PE is as high as 70 times, and in such a comparison, the acquisition of ** does not seem to be so outrageous.
Regardless, market sentiment is the most direct reaction to this merger.
Affected by this news, Mindray Medical was active throughout the day**539%, while Huitai Medical**457%, who took advantage and who suffered, shareholders voted with their feet.
Hit the top 10 in the world
This is not a cheap business, and Mindray Medical has its own calculations.
Relying on its three major businesses, life information and support, in vitro diagnostics, and medical imaging, Mindray has not only reached a market value of 300 billion yuan, but also entered the top 30 global medical device companies.
Mindray's goal is to be among the world's top 20 medical devices by 2025, and according to Mindray's annual growth rate of 20%, this goal is not far away.
However, Mindray's ambitions don't stop there. The top 20 in the world is only Mindray's goal at the current stage, and the top 10 in the world is a longer-term goal.
To achieve such a goal, it is not enough to rely on Mindray's existing business.
Looking at the world's top 10 medical device companies, more than half of them are dominated by high-value consumables business, and the main business of Medtronic, which ranks first, and Johnson & Johnson, which ranks second, are high-value consumables, and the profitability, cash flow, and performance growth certainty of these high-value consumables companies are in the leading position in the industry.
Therefore,Entering the field of high-value consumables is very important for Mindray's long-term goals.
With the acceleration of China's aging population, the cardiovascular incidence rate will continue to increase.
Compared with developed countries, the number of electrophysiological surgeries per million people in the United States has reached 1,300, while in China it is only one-tenth of it, and the penetration rate has huge room for growth.
According to estimates, the domestic market size of electrophysiology is more than 10 billion yuan, and the domestic market size of coronary access and peripheral vascular intervention products is more than 15 billion yuan.
The question is, can Huitai Medical become Mindray's new thigh that hits the top 10 in the world?
Referring to the operating income in 2022, the revenue of Mindray's three pillar businesses is 1340100 million, 1025.6 billion, 646.4 billion, while Huitai Medical's revenue in the same year was 120.4 billion yuan.
In other words,Huitai Medical's annual revenue needs to increase by at least 5 times before it can become Mindray's real reliance.
It is not easy to achieve such a goal. Although Huitai Medical is the first domestic brother in the cardiovascular field, most of the domestic cardiovascular market is occupied by foreign companies.
The data shows that in the domestic electrophysiology market, the share of foreign manufacturers such as Johnson & Johnson, Abbott, and Medtronic is close to 9%; In the domestic market of coronary access and peripheral vascular intervention, the total market share of foreign manufacturers exceeds 6%.
There is also a way, to go overseas.
Worries emerge
Speaking of Mindray's overseas layout, it can be traced back to 2008.
In the same year, Mindray Medical acquired Datascope Life Information and Support Business in the United States and Artema, a well-known brand in the field of respiratory gas monitoring in Sweden, expanding the overseas life monitoring business market and obtaining some key technologies.
Since then, Mindray Medical has fully started buying, buying, buying. Since 2008, Mindray has completed nearly 20 global acquisitions. It can be said thatThe history of Mindray Medical is a history of global mergers and acquisitions.
*: SPDB International, Gaohe Investment Research Center.
By 2020, Mindray Medical has entered more than 700 high-end hospitals in the global market. Although the product share is not high, and the overseas business is less than half of the whole, Mindray Medical announced at that time that it would increase the proportion of overseas business revenue to 70%.
Now, three years later, although this goal is far from being achieved, in the past year, Mindray Medical has re-entered the acceleration stage in overseas markets.
According to the financial report data, in the first half of 2023, Mindray Medical's overseas sales revenue will be 669.5 billion yuan, accounting for about 40%; The growth rate in the third quarter further accelerated to more than 20% compared to the second quarter, while the revenue growth rate in developing countries further accelerated to more than 30%.
CMBI believes that the overseas market space is huge and the policy environment is highly predictable. With the continuous improvement of Mindray's international competitiveness and the continuous strengthening of overseas platform construction, the company's overseas business is expected to maintain a good growth momentum.
The merger and acquisition of Huitai Medical undoubtedly has a plan to further open up overseas markets.
In the first three quarters of last year, Huitai Medical's overseas business grew by about 90%, but it accounted for only 16% of the company's overall revenue, which means that Huitai Medical still has huge space in the overseas market.
Mindray Medical also made no secret of its intentions, "It will make full use of the advantages of global marketing resources to promote the business development of electrophysiology and related consumables, improve the global layout of the target company's business, and promote the target company to achieve a leap from domestic leadership to international leadership." ”
However, there are also hidden worries behind the purchase.
Mindray's aggressive spending on mergers and acquisitions and sales expenses, as well as its relatively low R&D investment, have always been a concern for the market.
If M&A resources cannot be turned into technological advantages, then Mindray's moat may not be as strong as it seems.
In 2013, Massimo initiated a patent infringement and breach of contract lawsuit against Mindray in the United States, and finally in November 2015, Mindray took the initiative to seek a settlement with Massimo and paid Massimo $25 million.
The effects of this patent lawsuit, like a butterfly unleashing a storm, are still being amplified today.
The most typical is the patent dispute between Mindray Medical and Komen Medical, from 2019 to September 2023, although the Supreme People's Court finally ruled in favor of Mindray, the industry generally believes that Mindray Medical won undignified.
According to market commentators quoted by "Polypeptide Chain", these patents of Mindray's litigation peers are basically not core patented technologies. In the past, there were many immature places in China in terms of patent application, so some patents without inventive step could be easily successfully declared.
In recent years, patent lawsuits initiated by Mindray Medical have become more and more frequent, almost suing domestic peers, which seems to confirm Mindray's weakness and anxiety.
Whether such a story will be repeated in the overseas market is probably the most worrying thing for Mindray Medical.
The operation of "civil war, inmate, and foreign war" is likely to bring huge disasters to the innovation and development of the medical device industry.
Reference: Neos Life Nest: Tell Mindray all over the same company, I'm in a hurry!
Gaohe Investment Research Center: The growth history of Mindray Medical is a history of mergers and acquisitions!
Mindray Medical's report on the acquisition and interactive questions.