①The central bank's share buyback and credit support policy has attracted people who are willing to take the initiative. Beijing Balance Medical Technology Co., Ltd. shareholder and actual controller Jin Lei plans to use special loan funds to increase the company's shareholding by no less than 0.1 million shares; ②Market participants believe that the medical instruments industry has been declining in the capital markets for several years in a row, which is inconsistent with the gradually improving fundamentals, perhaps the reason why the rediscount buyback policy is first implemented in this industry.
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Caifeng Society reported on October 7th (by reporter Xia Lianghua) that the central bank's share repurchase and increase stake policy welcomed the first "trailblazer", Beijing Balance Medical Technology Co., Ltd. (688198.SH), announced on the evening of October 7th that the company's controlling shareholder and actual controller Jin Lei intends to use special loan funds to increase the company's shares, marking the entry of 300 billion repurchase and increase stake funds into the market.
Controlling shareholder of Beijing Balance Medical Technology Co., Ltd. intends to increase holdings through loans.
According to the announcement, Jin Lei plans to increase holdings of the company's shares through the Shanghai Stock Exchange trading system in the next 6 months starting from October 8, 2024, in ways allowed (including but not limited to centralized bidding and block trading). This increase stake does not have a price limit, with the planned number of shares to be increased starting from 0.1 million shares, and the upper limit of the increase stake is 1.5503% of the total share capital of the company. Based on this calculation, the planned number of shares to be increased should not exceed 2.13 million shares.
This is the first company to respond to the central bank's share repurchase and increase stake through loan policy.
On September 24th, the State Council Information Office held a press conference. Pan Gongsheng, Governor of the People's Bank of China, stated at the meeting that there will be the establishment of share repurchase and increase stake through loans, guiding commercial banks to provide loans to listed companies and major shareholders for repurchasing and increasing stakes in listed companies. The initial quota for the loans is 300 billion yuan. The People's Bank of China will distribute the loans to commercial banks, providing 100% funding support, with an interest rate of 1.75% for the re-lending capital provided by the People's Bank of China. Pan Gongsheng also mentioned that if this work is done well, additional funds can be added in the future.
According to market reports on September 27th, some banks have issued a notice to carry out the marketing promotion of special loan services for share repurchase and stake increase, requiring domestic branches to prepare to start marketing promotions. Subsequently, there was news that the head office of domestic major joint-stock banks had issued notices on shareholding and repurchase loans to their branches in the jurisdiction.
Market sources told the Caixin reporter that the increased shareholding of Beijing Balance Medical Technology Co., Ltd.'s controlling shareholder's loans indicates that the official entry pace of the 300 billion refinancing repurchase funds set up to protect the capital markets by the central bank has begun.
For Beijing Balance Medical Technology Co., Ltd., the company is currently in a growth stage with significant research and development investment. In the first half of this year, the company's R&D expenses were approximately 77.07 million yuan, an increase of nearly 100% year-on-year. To maintain the company's stock price, it would be a good choice for the controlling shareholder to use the central bank's share buyback and refinancing to increase the shareholding of the company.
Borrowing money to increase the shareholding may indicate the controlling shareholder's bullish outlook on the company's development prospects. According to the company's plan, the current R&D pipeline layout of the company is rich, with the expansion of TAVR and other interventions in valve delivery product launches imminent. It is expected that multiple heavyweight products will be launched between late 2024 and 2025, making a significant contribution to the company's performance.
The medical instruments sector has undergone a significant adjustment.
Why did the first central bank share buyback and refinancing policy settle in the medical instruments sector? The above-mentioned market sources suggest that this may be related to the continuous adjustment of the industry in the capital markets in recent years, leading to a more stable underlying situation. In this scenario, some industrial capital and controlling shareholders believe that the company's value is undervalued.
Despite a more than 30% increase in the medical instruments sector in the week before the holiday, as of September 30th, several industry sector ETFs such as the Medical Instruments ETF (159883) and the CSI Health Care ETF (512010) have continued to decline for four consecutive years, with cumulative declines generally exceeding 50%.
However, the industry's fundamentals are not as bad. According to IQVIA's data, the other medical instruments market declined by 24% year-on-year in Q1 2024, with imaging equipment being the most affected, dropping by 27%. Nevertheless, some market analysts believe that the subsidized loan policy in 2023 led to an early release of demand in the medical devices market. But with the gradual implementation of the trade-in policy, market growth is expected to be promoted in the second half of the year.
Consumables have performed significantly better, for example, the vascular intervention device market saw a year-on-year increase of over 10% in the first half of 2024; the surgical area market grew by 4.6% in the first half of 2024, with particularly rapid growth in the ultrasonic scalpel and suture markets.
In the first half of 2024, the fiscal health expenditure reached 1058 billion yuan, and the annual budget for fiscal health expenditure is approximately 2283.6 billion yuan. The year-on-year growth rate of fiscal health expenditure in the second half of the year is expected to reach 18.34%.
