“Science and Technology Innovation Board Daily”, January 29 — Today, Huitai Medical, a leader in electrophysiology on the Science and Technology Innovation Board, opened 16.77% higher. As of press release, the stock had risen more than 9% to 395.2 yuan/share.

On the evening of January 28, Mindray Healthcare, the “leading medical device” with a market capitalization of 100 billion dollars, announced that it will take control of Huitai Healthcare. This is the first A-share acquisition in the medical field in 2024, and it is also the first case of the Science and Technology Innovation Board's “Cash A Collection A” transfer of control.

Mindray Healthcare announced that the company plans to acquire 21.12% of Huitai Medical's shares through an agreed transfer through an agreement transfer of about 6.652 billion yuan, with a transfer price of 471.12 yuan/share; at the same time, Shenmai Holdings plans to transfer all 0.12% of the general partnership interests of Zhuhai Tongsheng held by Chenyihong. Zhuhai Tongsheng currently holds 3.49% of Huitai Medical's shares.

According to the report, on the same day that the above acquisition plan was officially announced, Mindray Healthcare announced at an investor event that the consolidated valuation of the transaction was 30.2 billion yuan, corresponding to Huitai Medical's closing price premium rate of 25% on January 26. Refer to Huitai Medical's average price premium rate of 23% for the first 60 days. Furthermore, all of the funds involved in this transaction will come from Mindray Healthcare's own funds, and by the end of September 2023, Mindray Healthcare's monetary fund balance was 19.667 billion yuan. Mindray Healthcare said the deal will not put significant financial pressure on Mindray Healthcare.

If the transaction is successfully completed, Shenmai Holdings and its co-operator, Zhuhai Tongsheng, will hold a total of 24.61% of Huitai Healthcare's shares. Huitai Healthcare's controlling shareholder will be changed to Shenmai Control, and the actual controllers will be changed to Li Xiting, Chairman of Mindray Healthcare, and Xu Hang, co-founder of Mindray Healthcare. Cheng Zhenghui, the original actual controller of Huitai Healthcare, is still the second-largest shareholder of Huitai Healthcare and will continue to serve as vice chairman and general manager.

▌Is the “medical device leader”'s premium acquisition of the leading cardiovascular segment racetrack a win-win strategy?

Huitai Medical's main business is R&D, production and sales of products such as electrophysiology, coronary access, and peripheral vascular intervention. It is a leading domestic enterprise in the field of electrophysiology and a leading domestic enterprise in the cardiovascular field in China. It has deep technical reserves and a rich product matrix. Its cardiac electrophysiology products cover more than 800 hospitals, vascular intervention products cover more than 3,000 hospitals, and have obtained EU CE certification for 14 products. Registration and market access have been completed in more than 90 countries and regions. Net profit has increased by more than 60% in the past three years.

In the first three quarters of 2023, Huitai Healthcare achieved revenue of 1,214 billion yuan, up 36.78% year on year, and net profit of 403 million yuan, up 54.75% year on year. According to its performance forecast, it is expected to achieve net profit of 5.1 to 565 million yuan in 2023, up 42.45% to 57.81% year on year, and 445 million yuan to 504 million yuan after deducting non-net profit, up 38.38% to 56.78% year on year.

As of the third quarter of 2023, Huitai Healthcare's cash and cash equivalent balance at the end of the period was 452 million yuan.

Guolian Securities said that by introducing Mindray Healthcare, a leading domestic medical device company, as the controlling shareholder, it will help strengthen Huitai Medical's core competitiveness in the fields of electrophysiology, coronary access, and peripheral vascular intervention, enhance the company's R&D and channel capabilities, and build a leading enterprise with global competitiveness in the field of cardiovascular intervention. Referring to comparable company estimates, Huitai Medical was given 45 times PE in 2024, with a target price of 458.51 yuan, maintaining a “buy” rating.

Mindray Healthcare was founded in 1991, started with monitors, and went public in 2018. It is a leading domestic medical device company with a market value of 100 billion dollars. For Mindray Healthcare, this is the starting point of its entry into the cardiovascular segmentation circuit. The company stated in the announcement that it is firmly optimistic about the market trends of cardiovascular products such as electrophysiology, and that continuously constructing and enriching the consumable-type business layout is one of the company's important strategic development directions. Through this transaction, Mindray Healthcare will use this to enter the cardiovascular field related circuit. In the future, it will also use this as a basis to horizontally expand other consumables fields and improve the product matrix.

According to the Evaluate Medtech report, the cardiovascular related field ranks second in the global medical device market size ranking, second only to in vitro diagnosis, and has maintained rapid growth. In China, the market for cardiovascular products such as electrophysiology is large and the penetration rate is relatively low. In recent years, under the impetus of national policies, the industry has accelerated development.