Tianxing Medical IPO: The industry market size is less than 10 billion yuan, and there is a risk of declining gross profit margin | mega slot 88, slot kakek petir login, types of betting
In July this year, the anti-corruption campaign in the pharmaceutical industry was launched in all fields with unprecedented intensity. Amid the wave of anti-corruption in medicine, several pharmaceutical companies have withdrawn their IPO applications. On September 26, the IPO application of Beijing Tianxing Medical Co., Ltd. (hereinafter referred to as "Tianxing Medical") was accepted by the Science and Technology Innovation Board, breaking the rumors that the IPO of pharmaceutical companies was suspended.
Information shows that in this IPO, Tianxing Medical plans to raise 1.093 billion yuan to invest in Suzhou smart factory projects, product research and development projects, marketing network projects and supplement working capital. As of the end of the first quarter of this year, the company's total assets were 382 million yuan, which was only about 1/3 of the total funds raised in this IPO.
It is not difficult to find that the amount of funds raised this time is relatively large, but Tianxing Medical’s own business scale and asset scale are relatively small, so it has received widespread attention from the market. So, what is the company's current performance and future trends? Can the company's valuation support its fundraising plans?
The industry market size is less than 10 billion yuan
Tianxing Medical was established in 2017 with investment from Nie Wei, Dong Wenxing, and Chen Hao, with a registered capital of 63.6363 million yuan. The company is mainly engaged in the research and development, production and sales of sports medicine implants, active equipment and consumables, and surgical tools. It is an innovative sports medicine medical device company.
Sports medicine mainly diagnoses and treats sports-related injuries to bones, joints, muscles, tendons, cartilage, etc. The treatment methods mainly include physical therapy including immobilization, compression, and ice application, drug therapy mainly composed of analgesics and anti-inflammatory drugs, and surgical therapy with arthroscopic surgery as the core. Among them, arthroscopic surgery has the advantages of minimally invasive, good curative effect, strong pertinence, and fast recovery. It is widely used in meniscal injuries and cruciate ligament injuries, and is also the most important treatment method in the sports medicine profession.
Tianxing Medical’s implant products, such as wired anchors, interface screws, looped titanium plates, meniscal repair systems, etc., are used in the treatment and rehabilitation of injuries related to joints and soft tissues such as shoulder joints, knee joints, etc. In addition, Tianxing Medical's active equipment and consumable products mainly include plasma surgical equipment, endoscopic surgical planers and endoscopic camera systems, which are the main equipment for the surgical treatment of sports injuries. During the reporting period, the above two types of business income accounted for more than 90% of the company's operating income.
According to the prospectus, from 2020 to the first quarter of 2023 (hereinafter referred to as the "reporting period"), Tianxing Medical's operating income was 26.4072 million yuan, 73.013 million yuan, 148 million yuan, and 35.0368 million yuan respectively, and the net profits were -50.8133 million yuan, -110 million yuan, 40.3443 million yuan, and 3.895 million yuan respectively.
The prospectus shows that Tianxing Medical counts Dabo Medical (002901.SZ), Kailitech (300326.SZ), Weigao Orthopedics (688161.SH), Chunli Medical (688236.SH) and other companies as peers For comparable companies, the average operating income of the above-mentioned companies are 1.352 billion yuan, 1.631 billion yuan, 1.412 billion yuan, and 330 million yuan respectively, and the average net profits are 334 million yuan, 470 million yuan, 234 million yuan, and 71.9436 million yuan respectively.
In contrast, there is a big difference in performance scale between Tianxing Medical and the above-mentioned peer comparable companies.
The above-mentioned differences in performance scale may be due to differences in business structure. The business types of comparable companies in the industry are relatively more diversified, and the main business of Tianxing Medical is relatively concentrated in the field of sports medicine. So, what is the market position of Tianxing Medical in the sports medicine industry? What is the development potential of this market?
According to Zhuoshi Consulting, in 2022, the number of people suffering from sports medicine-related diseases in my country will be approximately 160 million, of which more than 20 million will suffer from sports injuries, and the number of people suffering from other sports medicine-related diseases will be approximately 140 million. In the future, as the sports participation rate of Chinese residents continues to increase and the aging of the population deepens, the number of people suffering from sports medicine-related diseases in my country is expected to reach approximately 190 million by 2030, with a compound annual growth rate of approximately 2.0% from 2022 to 2030.
With the gradual development of minimally invasive technology, the number of arthroscopic surgeries performed in our country has increased significantly. In 2022, the number of sports medicine arthroscopic surgeries performed in China will be approximately 1.177 million, with a corresponding market size of approximately 5.58 billion yuan. By 2030, it is expected that the number of sports medicine arthroscopic surgeries performed in China will reach approximately 3.506 million units, with a compound annual growth rate of approximately 14.6% from 2022 to 2023. The corresponding market size will be approximately 13.63 billion yuan, and the compound annual growth rate of the market size will be approximately 11.8%.
Estimating by dividing Tianxing Medical’s operating income by the market size, the company’s market share will be approximately 2.65% in 2022. According to data from Chishi Consulting, foreign brands will account for more than 80% of China's sports medicine market in 2022.
Tianxing Medical said that the current domestic sports medicine market is dominated by foreign-funded enterprises, mainly because foreign-funded brands entered the domestic market earlier, have strong technical and financial strength, and have accumulated a good user base. As domestic technology and manufacturing continue to catch up, coupled with policy guidance, domestic substitution is expected to begin.
However, the function of the implant is to fix the bone and soft tissue through implantation in the human body, maintain a permanent combination, and meet the patient's needs for recovery of exercise ability after surgery. Therefore, it needs to have better biocompatibility with the human body, higher strength, and more advanced fixation technology. At present, domestic enterprises as a whole are in the early stages of development and may not have technological leadership.
According to statistics from Zhuoshi Consulting, the market size of my country's sports medicine will be approximately 5.5 billion yuan in 2022. Although the compound growth rate from 2022 to 2023 will be 11.8%, by 2030, the size of the market is expected to be only approximately 13.6 billion yuan, with limited development space.
With this IPO, Tianxing Medical plans to raise 440 million yuan for the smart factory project. Considering its current share in the sports medicine market, it is still unknown whether it can successfully absorb production capacity after the project is expanded.
It is worth mentioning that as of the end of the first quarter of 2023, Tianxing Medical had 293 million yuan in monetary funds, accounting for 86.31% of the current assets. In this IPO, the company plans to use 300 million yuan to supplement working capital, which is second only to the amount raised for the Suzhou smart factory project. Is the use of this fund reasonable?
Core raw materials rely on a single overseas supplier, and gross profit margins are under pressure under centralized procurement
Performance growth is crucial to corporate operations. At the same time, gross profit margin, as an important indicator of corporate profitability, cannot be ignored.
Each period of the reporting period, Tianxing Medical’s comprehensive gross profit margins were 60.43%, 68.68%, 71.45%, and 70.55% respectively. During the same period, the average gross profit margins of medical device products of comparable companies such as Dabo Medical, Kailitech, Weigao Orthopedics, and Chunli Medical were 76.86%, 76.15%, 72.82%, and 66.53% respectively. In contrast, Tianxing Medical's comprehensive gross profit margin is generally lower than that of comparable companies in the same period, and the trend is contrary to that of its peers.
In response to the above situation, Tianxing Medical explained that in 2020, the company's comprehensive gross profit margin was slightly lower than that of comparable companies in the same industry. The main reason is that the company was still in the early stages of commercialization at that time, while the revenue scale of comparable companies in the same industry was already large, and the scale effect was more prominent. From 2021 to the first quarter of 2023, the company's comprehensive gross profit margin is relatively stable, and there are certain differences compared with comparable companies in the same industry. This is mainly due to differences in the product structure of the company and comparable companies in the same industry. In 2022, the gross profit margin of Chunli Medical's sports medicine products, a comparable company in the industry, is 65.18%, which is not significantly different from the company's gross profit margin.
If, as stated by Tianxing Medical, there are differences in the product structure between the company and comparable companies in the industry, then why do the gross profit margins of the above-mentioned peers decline year by year? Will the gross profit margin trend of Tianxing Medical converge with the above-mentioned companies in the future?
Data show that the main businesses of Kailitech, Dabo Medical, and Weigao Co., Ltd. include orthopedic implant consumables, orthopedic trauma implant consumables, and the production, research and development, sales, and service of orthopedic consumables. The main products of the three companies all contain orthopedic consumables.
In recent years, in order to reduce the financial burden on orthopedic patients, orthopedic consumables have been included in centralized bulk procurement (hereinafter referred to as "centralized procurement") across the country. Among them, in November 2021, the procurement alliance of 12 provinces (autonomous regions and municipalities) led by Henan Province carried out centralized bulk procurement of orthopedic trauma medical consumables. The overall average reduction in the winning price reached 88.65%, launching the first centralized procurement of orthopedic consumables.
In February 2022, the "3+N" alliance of Beijing, Tianjin and Hebei launched the quantity-linked procurement of orthopedic trauma medical consumables, and the winning results were announced in March of the same year. In July 2022, the country launched a centralized mass purchase of orthopedic spine consumables and announced the winning results in September of the same year.
It is not difficult to find that 2022 is a big year for centralized purchasing of orthopedic consumables, and the terminal prices of related products covered by centralized purchasing have declined to a certain extent. This has led to a decline in operating performance and gross profit margins of some manufacturing companies.
The annual report shows that in 2022, the sales revenue of Kailitech Orthopedic spine or trauma products will be 106 million yuan, a year-on-year decrease of 31.08%. In the same year, the sales revenue of Dabo Medical's trauma products was 542 million yuan, a year-on-year decrease of 51.89%; the sales revenue of spinal products was 472 million yuan, a year-on-year decrease of 16.5%. In the same year, the sales revenue of Weigao orthopedic spine products was 886 million yuan, a year-on-year decrease of 13.1%; the revenue of trauma products was 417 million yuan, a year-on-year decrease of 31.57%.
From the perspective of gross profit margin, in 2022, the gross profit margin of Dabo Medical’s trauma products will be 74.35%, a year-on-year decrease of 11.91 percentage points; the gross profit margin of spinal products will be 85.71%, a year-on-year decrease.slipped 2.31 percentage points. In the same year, the gross profit margin of Weigao's orthopedic spine products was 89.16%, a year-on-year decrease of 0.7 percentage points; the gross profit margin of trauma products was 78.57%, a year-on-year decrease of 6.2 percentage points.
It can be seen that in 2022, the performance of Kailitech, Dabo Medical, and Weigao Orthopedics among the comparable companies of Tianxing Medical will be affected by the centralized procurement of orthopedic consumables.
On September 14, 2023, the state launched a national-level volume procurement bidding process for sports medicine medical consumables. Tianxing Medical's main sports medicine implant products won the bid in this centralized procurement. If we refer to the performance of the related products of the above-mentioned comparable companies after winning the bid for centralized procurement, this centralized procurement of sports medicine implants may lead to price reductions for Tianxing Medical's related products, thereby affecting its operating performance.
Tianxing Medical also issued a risk warning in the prospectus, saying that as the country further promotes centralized purchasing policies related to sports medical consumables, the company's main products will face risks such as being included in centralized purchasing and price reductions, which may have an adverse impact on the company's operating performance.
It should be pointed out that in addition to the pressure to reduce product prices, the reliance on a single overseas supplier for core raw materials may be another factor leading to the decline in the company's gross profit margin. The prospectus shows that ultra-high molecular weight polyethylene wire is the core raw material for Tianxing Medical’s main products, polyether ether ketone anchors with threads and titanium plates with loops. However, during the reporting period, the company had a single procurement channel for this raw material, and DSM Biomedical B.V. was the only supplier.
In this regard, Tianxing Medical stated that the company's core raw material ultra-high molecular weight polyethylene wire procurement is dependent on overseas suppliers or a single supplier. If the purchase price and supply stability of ultra-high molecular weight polyethylene wire are negatively affected by global economic conditions and market supply and demand, regional regulatory policies, natural disasters and other factors, large fluctuations may occur and have a direct impact on the company's gross profit margin stability and product production.
It is worth noting that in this IPO, Tianxing Medical plans to issue 15.4698 million shares and plans to raise 1.093 billion yuan. Based on this estimate, the stock price of this issuance is expected to be approximately 70.65 yuan per share, corresponding to a total market value of 4.372 billion yuan, and a corresponding price-to-earnings ratio calculated based on the net profit attributable to the parent company in 2022 of 108 times.
Calculate the total market value by multiplying the closing price of A shares by the total equity as of October 30, and divide it by the net profit attributable to the parent company in 2022 to estimate the static price-earnings ratio. Among comparable companies in the same industry, except for Kailitain, the net profit attributable to the parent company in 2022 is loss and In addition to Dabo Medical's net profit attributable to the parent company in the fourth quarter of 2022, which is a loss, among the other two comparable listed companies with stable operations, Chunli Medical's static price-to-earnings ratio is 34.47 times, and Weigao Orthopedics' static price-to-earnings ratio is 11.77 times. In contrast, the pricing of Tianxing Medical's current issuance is relatively high, which may be reflected in the fact that the company's proposed fundraising amount is three times its total assets.
Under the registration system, new stocks have frequently experienced "shrinkage in fundraising." According to Wind data, as of October 25, among the 562 companies on the Science and Technology Innovation Board, 217 companies have actually raised less than the original plan. Faced with many of the above-mentioned factors that may have an adverse impact on performance, and with limited market development space, can Tianxing Medical gain the recognition of investors even if it successfully passes the meeting?
