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Product: research Institute of Sina Finance listed Company
Wen / Xia Chong Studio
Core point of view: Earl Ophthalmology Industry FundTopcryptonftgamesThe capital leverage has pried the operating lever of performance growth, but why does the company propose that the M & A model will gradually "withdraw from the historical stage"? Does it mean that the effect of M & A-driven growth is decreasing behind the single-digit growth rate of Ayre ophthalmology? When the M & A model gradually withdraws, is it possible to expect future growth of the M & A-driven "Eye Komao"? Under the radical expansion, is it possible for acquisitions with high premium and high goodwill to eat up Ayre Ophthalmology? If you leave behind a large amount of underlying assets in vitro, what will be the solution to the problem of industrial fund withdrawal?
With the closing of the 24-year quarterly report, the A-share ophthalmology track industry as a whole is under pressure.
We selected four A-share ophthalmology track companies, including Ayre Ophthalmology, Huaxia Ophthalmology, Puri Ophthalmology and he's Ophthalmology. In the first quarter of 2024, the median revenue growth rate of the ophthalmology industry was only 3%.Topcryptonftgames.67%, the median growth rate of net profit dropped sharply by 22.63%.
It should be pointed out that the ophthalmology industry as a whole showed rapid growth in 2023, with a median revenue growth rate of more than 30% and a median net profit of more than 60%. Taking a closer look at the reasons, due to the impact of the 22-year epidemic and the related demand was concentrated in 23 years, there was a phenomenon of low base and high growth in 23 years.
However, judging from the performance of the above four ophthalmologists in the first quarter, they are roughly divided into the following three categories: first, Earl Ophthalmology and Huaxia Ophthalmology, which increase profits as well as income; second, Puri Ophthalmology, which increases revenue but not profits; and third, Ho Ophthalmology, whose revenue and net profit both decline. What kind of signal is reflected behind these "very different" data? Based on the above background, we have an in-depth review of the above four ophthalmology, this article will focus on the analysis of Ayre ophthalmology.
Two big doubts of "Eye Komao"
In an in-depth review of Ayre's ophthalmology process, we found that today's "Eye Mau" has two major puzzles:
First, the competitive pattern of the company is dominant, and the performance growth is good, so why does the stock price deviate greatly from the fundamentals?
In the super-strong pattern of the ophthalmology track, Ayre ophthalmology is undoubtedly the absolute leader. In 2023, the revenue of Ayre Ophthalmology was 20.319 billion yuan, while that of Huaxia Ophthalmology, Prior Ophthalmology and Ho's Ophthalmology was 7.888 billion yuan, less than 40% of Eye Ophthalmology. At the same time, Eye's revenue once again hit a record high and broke through the 20 billion mark. In 2023, the company achieved operating income of 20.367 billion yuan, an increase of 26.43% over the same period last year, while the net profit belonging to the owner of the parent company was 3.359 billion yuan, an increase of 33.07% over the same period last year.
However, the company's share price seems to deviate from the fundamentals. The company's share price has continued to fall since its peak in 2021, according to wind. As of the closing price on May 10, the company's share price was 12.83 yuan per share, down nearly 70% from its peak.
Second, Eye successfully pried the operating lever of performance growth with the capital leverage of the industrial fund of "listed company + PE", but why did the company put forward the theory of "M & A mode withdrawing from the historical stage"?
According to the survey minutes in July 2023, when investors asked the company if it had further accelerated the pace of mergers and acquisitions, the company explained that the industrial M & A fund model explored and implemented since 2014 had given the company a significant first-mover advantage and reserved a large number of high-quality projects. but it is strategic, phased and transitional in nature. At present, the size of listed companies is getting larger and larger, the financial strength is gradually enhanced, the carrying capacity continues to improve, and the number of hospitals built by listed companies is gradually increasing. After the industrial funds expire one after another, they will gradually withdraw from the historical stage. "one leaf boat has sailed through ten thousand mountains."
It should be pointed out that driven by the M & A model, Ayre's ophthalmology performance has maintained a growth rate of more than 20% all the year round.
It is worth noting that since 2020, the company seems to have begun to mention frequently that the M & A model will gradually withdraw from the historical stage theory. According to the incomplete statistics of the announcement of investor relations activities, the theory of the withdrawal of M & A mode from the historical stage has been mentioned as many as 6 times.
The marginal effect of M & A mode is decreasing? Changes between revenue side and cost side
Since 2014, the company has set up industrial funds to speed up the layout of the network with the mode of "listed companies + PE". Specifically, a partnership is set up by core talents to share shares in the new hospital with the M & A fund, in which the shareholding ratio of the M & A fund is generally less than 20%. After the new hospital reaches a certain profit level, Eye Ophthalmology will acquire the hospital equity held by the partners at a fair price by issuing shares, paying cash or a combination of the two. Eye Ophthalmology and M & A Fund signed "Trademark license (Golden Kirin analyst) use Agreement" and "Management Consulting Service Agreement", authorizing the ophthalmology hospitals it acquired or set up to engage in ophthalmic health care business using the designated trademark and the brand name "Aier", and signed a "Technical Consulting Service contract" with these hospitals. The listed company shall provide advice related to the operation and management of the ophthalmic hospital under the fund (the hospital licensed to use the brand name is not a subsidiary of the company), and charge a service fee.
In this model, we find that there seems to be a positive correlation between subsidiary investment growth and revenue growth. The data show that both the company's revenue scale and its subsidiaries have increased, and the scale of investment in subsidiaries has increased from 4.5 billion yuan in 2019 to 15 billion yuan; in the same period, the company's revenue scale has increased from 10 billion yuan to 20.4 billion yuan.
It is worth noting that the growth rate of investment scale of subsidiaries is roughly matched with the growth rate of revenue, and it also seems to show a positive correlation. However, it should be pointed out that after being disturbed by the epidemic and other macro factors such as the epidemic in 2020 and 2022, the investment strength of the subsidiaries of the company did not pull the corresponding revenue growth rate, resulting in a certain deviation.
At the same time, we found that as an industry leader, El Ophthalmology's growth has not exceeded the overall performance of the industry, and the growth rate has rarely dropped to single digits, with revenue growth of only 3.5% in the first quarter of this year. It should be pointed out that the overall performance of the medical services sector in the first quarter was under pressure, and the adjusted medical services listed companies achieved a total operating income of 11.409 billion yuan, an increase of 2.07% over the same period last year.
The performance of the above two sets of data, whether it is possible to show that under special environmental factors, even if the company is blessed by mergers and acquisitions, the related performance increment does not seem to be significant.
From 2019 to 2023, the number of outpatients of the company is 6.6282 million, 7.5487 million, 10.1961 million, 11.2512 million and 15.1064 million respectively, and the unit prices of the corresponding guests are 1507 yuan, 1578 yuan, 14.71 million, 14.32 million and 1348 yuan respectively. It can be seen that before 2020, the company's volume and price increased together, but after 2020, the increment did not increase the price, and the customer unit price continued to decline in recent years, and the customer unit price fell by 15% compared with the peak in 2020 in 2023.
At the same time, we compare the annual investment of the company's new subsidiaries with the number of new medical institutions, and roughly calculate the input cost of the company's unit medical institutions. The data show that from 2020 to 2023, the input cost of the company's unit medical institutions is roughly between 29 million yuan and 46 million yuan, with an average of about 38 million yuan. (note, subsidiary investment may include new companies, the above data is only a rough calculation, not as the basis for investment. Specific data are subject to enterprise disclosure).
It should be pointed out that according to the report of Guoyuan Securities, the input cost of a single ophthalmology store is about 20 million yuan, which means that the company may need to re-examine whether the cost under the mode of M & A funds to acquire hospitals is appropriate.
The Hidden Corner under the Mode of M & A: the Source of tens of billions of funds and the pressure of exit
With the blessing of the M & A model, the number of medical institutions in Ayre Ophthalmology has expanded more than 10 times.
In 2014, there were 71 hospitals in Ayre Ophthalmology's brand hospitals and ophthalmology centers, of which 54 were listed companies (Jin Kirin analysts) and 17 were industrial M & A funds.
By the end of 2023, there were 881 Eye brand hospitals, eye centers and clinics worldwide. Among them, there are 750 in mainland China, including 439 listed companies, 311 industrial M & A funds, 8 in Hong Kong, 1 in the United States, 108 in Europe and 14 in Southeast Asia.
In this scale, the company's future capital expenditure may be larger. Under the "listed company + PE" mode, Ayre ophthalmology needs to merge the external assets into the listed company to complete the related capital withdrawal and so on. It should be pointed out that behind Ayre's participation in the establishment of these funds, there are financial investors such as Ping an Capital Management, and there is a large demand for the withdrawal of related funds. According to the 2023 annual report, the capital scale of listed companies participating in M & A funds reached 652 million yuan. It is reported that each M & A fund Ayre Ophthalmology only gives 10% of the funds, so it is roughly estimated that the size of its industrial M & A fund is between 3 billion and 6 billion yuan. According to a rough estimate of the individual merger cost of 30 million yuan, the capital demand for external assets of the company in the future will be about 10 billion yuan.
For the capital needs of the above large capital expenditure, how will Ayre Ophthalmology solve? Relying solely on their own business hematopoietic capacity or obviously insufficient, while the company's debt expansion may increase the company's financial risk; if the company fixed growth and other capital market direct financing channels, then major shareholders will face equity dilution and equity market financing rebalance and other factors.
Despite the company's rapid expansion, Ayre's ophthalmology financial data have performed extremely well. This may be mainly due to the blessing of the M & A mode, on the one hand, the performance pressure of related losses incubated in vitro is isolated in vitro; on the other hand, the injection of high-quality assets further thickens the performance of listed companies. Quite surprisingly, there is a great difference between the internal and external statements of Ayre listed companies, so it is necessary to guard against the financial risks that may exist in the weak mother and the strong son.
According to public data, from 2019 to 2021, the asset-liability ratio of Ayre Group was 91.18%, 63.63% and 65.84% respectively, and the asset-liability ratio was on the high side, while Ayre Ophthalmology's asset-liability ratio was only about 30% to 40%. It should be pointed out that Ayre Ophthalmology is the best asset of Ayre Group and contributed nearly 90% of its profits from 2019 to 2021, but the headquarters of Ayre Group has basically no hematopoietic capacity at present, and there has been a continuous net cash outflow from its operating activities in recent years.
In addition, the report of Aier Ophthalmology's parent company shows that other receivables rose sharply from 1.636 billion yuan in 2018 to 4.747 billion yuan in 2023. It is mainly related funds, with the top five customers accounting for 80.73%.
Sequelae of mergers and acquisitions: whether high goodwill and high premium acquisitions are suspected of transferring benefits growth sustainability after the ebb tide of mergers and acquisitions
Under the radical expansion, Ayre Ophthalmology has accumulated a huge goodwill. By the end of the quarter, the company's net goodwill was 6.564 billion yuan, accounting for more than 30% of the company's net assets.
With such a high goodwill, when the subject matter of high premium M & An is impaired, the relevant impairment will have a great impact on the company's performance. By the end of 2023, the company's goodwill balance at the end of the period is 8.065 billion yuan, the current net worth is 6.5 billion yuan, the company-related goodwill impairment amount is more than 1.5 billion yuan. It is worth noting that the asset impairment provision of the company's investment in subsidiaries is increasing year by year.
In addition to the issue of goodwill, the company's high premium acquisition has also raised questions from regulators and investors about whether there is a suspicion of benefit transfer. According to public data, Shaoxing Aier earned only 315300 yuan in the first nine months of 2022, lost 881000 yuan in 2021, and its net worth was only 1.48 million yuan, but Eye acquired it for 57.27 million yuan, a premium of 55 times. In August 2021, Ayre Ophthalmology plans to spend 33.675 million yuan to acquire a 75% stake in Heyuan Aier, which has a net asset of only 89500 yuan in the first half of 2021, at a premium of more than 500 times. The company denies that regulators have tortured the soul about whether there may be a transfer of benefits.
In addition to the issue of goodwill, the brand risks associated with the company's aggressive expansion do not seem to be ignored. By participating in the industrial M & A fund, the company allows its investment and the establishment of hospitals to use the company's designated trademark and "Aier" brand name to better meet the needs of ophthalmic patients around the country. Authorized to use the brand hospital as an independent legal person, not a subsidiary of a listed company, not controlled or managed by the listed company, and independently bear the debts or legal liabilities arising in the course of operation. In this mode, the company has brand risk and litigation arbitration risk. Authorized brand hospitals may fail to meet the operating standards proposed by the company due to inadequate implementation, misoperation, improper understanding and other reasons. in serious cases, risk events such as violations of laws and regulations, medical accidents and medical disputes may occur, affecting the overall brand image of the company. At the same time, when patients or other third parties have disputes with these hospitals, it is possible for the other party to sue and arbitrate the listed company as a co-defendant, resulting in the risk of litigation and arbitration.
Ayre ophthalmology frequently appears illegal advertising, excessive medical treatment, repeated charges, medical insurance violations and other phenomena, this compliance problem does not seem to match with hundreds of billions of market capitalization listed companies. According to the company's early warning pass, the company has more than 270 administrative fines for outbound investment.
According to public information, on April 9, the official website of Huanggang Municipal Government made public the results of administrative penalties for medical security administrative law enforcement in 2024 of the Medical Security Bureau of Huangzhou District. It shows that Huanggang Aier Eye Hospital Co., Ltd. has a number of illegal acts, such as over-treatment, over-standard charges, repeated charges, unreasonable charges, medication in excess of medical insurance conditions, and so on. Hongan Aier Eye Hospital Co., Ltd., which was punished on April 1, violated the provisions of Article 7 (1) of the measures for the Administration of Medical advertisements because its medical advertisements contained "medical technology, methods of diagnosis and treatment, names of diseases and thorough treatment". In January, Shenzhen Guiyuan Aier Eye Clinic was fined by Shenzhen Luohu Market Regulatory Bureau for "illegally issuing advertisements or carrying out false or misleading publicity." In 2021, Kunming Aier Eye Hospital induced the elderly to undergo cataract surgery to cheat insurance and so on.
Finally, it should be emphasized that there is a positive correlation between corporate performance growth and M & A mode. with the gradual withdrawal of M & A mode, can the company's endogenous growth support sustainable high growth in the future? This may be worthy of the attention of investors.
