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Pony Testing International Group Co.Ltd(300887) : demonstration and analysis report on the scheme of issuing shares to specific objects and listing on the gem (Second Revision)

Stock abbreviation: Pony Testing International Group Co.Ltd(300887) Stock Code: 300887 Pony Testing International Group Co.Ltd(300887)

Pony Testing International Group Co., LTD.

(101, floor 5, building 1, yard 66, Jindai Road, Haidian District, Beijing)

Issue shares to specific objects and on the gem

Demonstration and analysis report of listing scheme

(Second Revision)

December, 2001

1、 Background and purpose of this issuance of shares to specific objects

(i) Background of this release to specific objects

1. Inspection and testing industry is a strategic emerging industry supported by national policies

The inspection and testing industry is an important technical support for promoting the construction of a manufacturing power and a quality power, The United Nations Industrial Development Organization (UNIDO) and the international organization for Standardization (ISO) formally put forward the concept of national quality infrastructure, which integrates measurement, standards and conformity assessment (certification and accreditation, inspection and testing) are also known as the three pillars of the national quality foundation. These three constitute a complete technology chain, which plays a very important basic role in maintaining national and social public safety, promoting the improvement of product and service quality, protecting consumers’ interests, promoting the upgrading of industrial structure, etc. under the background of global industrial competition and the strategy of a strong scientific and technological country To some extent, mastering the voice of inspection and testing also means mastering the pricing power of quality and standards. Therefore, the State mentioned the development of inspection and testing industry in the 12th Five Year Plan, the 13th five year plan and the 14th five year plan, and accordingly positioned the inspection and testing service industry as high-tech service industry, producer service industry and science and technology service industry, A series of encouraging industrial policies have been issued.

In 2011, the general office of the State Council issued a policy document to integrate “inspection and testing service industry” into high-tech service industry; In 2014, the general office of the State Council issued the implementation opinions on the integration of inspection, testing and certification institutions (GBF [2014] No. 8), which opened the prelude to the reform of resource integration ownership of China’s inspection and testing institutions and comprehensively improved the operation efficiency of the inspection and testing industry; in 2016, the 13th five year plan for the development of certification, accreditation, testing and testing It is clearly proposed to steadily promote the construction of a fair and open inspection, testing and certification market system, simplify administration and delegate power, break departmental monopoly and industrial barriers, and promote the formation of a competitive national unified inspection, testing and certification market; Inspection, testing and certification in 2018 Standardized services are officially incorporated into the national classification of strategic emerging industries (2018), which helps to better play a leading role in the overall and long-term development of economy and society; the 14th five year plan for national economic and social development of the people’s Republic of China and the outline of long-term objectives in 2035 in 2021 It is pointed out that it is necessary to strengthen the construction of industrial basic capacity, improve the national quality infrastructure, build production application demonstration platform and industrial technology basic public service platform such as standard measurement, certification and accreditation, inspection and testing, test and verification. The next five to ten years will be a key period for the comprehensive, rapid and high-quality development of China’s social economy, and the inspection and testing industry will obtain broader development space.

2. The third-party testing industry has been improving for a long time, and private testing institutions have developed rapidly

In recent years, with the rapid development of China’s economy, the gradual improvement of people’s health awareness, the gradual deregulation of the market, and the rapid expansion of the market demand for third-party testing, China’s third-party testing institutions have ushered in a golden period of development, and the future prospect space is very broad. From 2014 to 2020, the scale of the industry market continued to achieve breakthroughs. The state successively issued the implementation opinions on integrating inspection, testing and certification institutions, several opinions on promoting fair competition and maintaining normal market order, and the guiding opinions of the State Council on accelerating the development of producer services and promoting the adjustment and upgrading of industrial structure, We should guide social forces to join the inspection, testing and certification industry, encourage private and foreign investment to enter the third-party testing industry, and the third-party testing industry will accelerate into the market-oriented stage. The overall market scale of China’s third-party inspection and testing industry has increased year by year, always maintaining a growth rate of more than 10%. The number of inspection and testing institutions as major participants and operators in the industry has also increased year by year since 2013, with an average increase of about 10%. By the end of 2020, there were 48919 inspection and testing institutions in China, an increase of 11.16% over 2019. The annual operating revenue was 358.592 billion yuan, an increase of 11.19% over 2019. From “made in China” to “China Quality”, the internal demand of enterprises, the upgrading of residents’ consumption and the improvement of government regulatory standards will promote the long-term prosperity of the testing industry.

Market scale of China’s inspection and testing industry from 2013 to 2020

Data source: State Administration of market supervision

With the continuous promotion of market-oriented reform, China’s private testing institutions continue to develop rapidly. By the end of 2020, there were 27302 qualified private inspection and testing institutions in China, an increase of 18.92% over 2019. In 2020, the annual revenue of private inspection and testing institutions was 139.194 billion yuan, an increase of 18.44% over 2019, 7.25 percentage points higher than the annual growth rate of the national inspection and testing industry. Private inspection and testing institutions have become an important part of China’s inspection and testing market and play a more and more important role in China’s inspection and testing market. Comparison of the number and growth rate of private institutions and national institutions in China’s inspection and testing industry from 2013 to 2020

Data source: State Administration of market supervision

3. The rapid development of emerging fields has injected surging momentum into the inspection and testing industry

From the perspective of downstream industries, China’s inspection and testing market has a wide coverage, and the traditional testing fields mainly include construction engineering, building materials Environment and environmental protection (excluding environmental monitoring), food, motor vehicle inspection, Shenzhen Agricultural Products Group Co.Ltd(000061) forestry, fishery and animal husbandry; emerging fields mainly include electronics and appliances, machinery (including automobiles), material testing, medicine, electricity, energy, software and informatization, and emerging fields not only include Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) It also includes the new demand of traditional industries under the improvement of detection intensity. According to the data of CNCA, the emerging fields have great development potential in the inspection and testing market. The relevant revenue maintained a high growth rate of about 20% every year from 2017 to 2019. In 2020, the growth rate of emerging fields affected by the epidemic slowed down, realizing a total revenue of 59.745 billion yuan, a year-on-year increase of 6.13%. With the global epidemic under control, emerging fields will inject surging momentum into the development of the inspection and testing industry.

As China’s economy enters a high-quality development stage, many emerging industries and emerging markets continue to emerge, and the continuous upgrading of new technologies has spawned a new demand for inspection and testing services. The national 14th five year plan clearly proposes to build a new pillar of China’s industrial system, focus on the new generation of strategic emerging industries such as information technology, biotechnology, new energy, new materials, high-end equipment, new energy vehicles, green environmental protection, aerospace and marine equipment, accelerate the innovation and application of key core technologies, and cultivate and expand new kinetic energy for industrial development. Inspection and testing institutions urgently need to take advantage of the development opportunities of the above strategic emerging industries to improve their testing and service capabilities in emerging fields and realize the leapfrog development of the industry.

4. The trend of industry intensification is obvious, and the market share of large enterprises is gradually increasing

The market competition pattern of inspection, testing and certification industry is scattered. Under the huge industry market scale, the market share of advantageous enterprises will continue to increase, and the industry intensive trend will continue to strengthen. According to the data released by the State Administration of market supervision, in 2020, the number of inspection and testing institutions with less than 100 employees in China accounted for 96.43%, and 73.38% of the inspection and testing institutions only provided inspection and testing services in the province, lacking the ability to carry out services in the country. In 2020, the number of inspection and testing institutions above Designated Size in China will reach 6414, and the operating revenue will reach 277.413 billion yuan. The number of inspection and testing institutions above Designated Size only accounts for 13.11% of the whole industry, but the operating revenue accounts for 77.36%. The inspection and testing industry has shown obvious differentiation between February and August, with a significant trend of intensive development. A large number of large-scale, high-level Strong Chinese inspection and testing brands are rapidly taking shape.

Large testing institutions can achieve scale advantages in operation, which are embodied in cost control ability, anti risk ability and ability to provide all-round services, so as to win in the market competition. The profit of small and micro institutions is very thin, the output value is very low, and they are facing integration or elimination in the long-term competition. From overseas experience, mature European and American markets with huge testing demand eventually grow into global giants in the testing field. From the perspective of revenue scale, the revenue of many global testing leading companies exceeds 10 billion yuan, and the volume scale far exceeds that of China’s testing leading companies. In addition, overseas testing companies are far better than China’s leading testing companies in business and regional diversification. With the gradual withdrawal of small and medium-sized participants in the industry and the continuous improvement of industry concentration, China is expected to grow into a high-quality testing company similar to overseas testing leaders in the medium and long term. The transformation of Chinese testing from a large industry to a large company has been started, and the long-term growth of leading companies can be expected.

5. At a time of great changes in the pharmaceutical industry, the growth potential of pharmaceutical R & D investment is huge

In today’s world, the total population continues to grow, the trend of social aging is obvious, people’s health care consciousness is constantly increasing, disease spectrum is constantly changing, and public health events like New Coronavirus appear. On the other hand, the medical security system of various countries has been continuously improved. For example, a series of medical reform policies such as graded diagnosis and treatment and cooperative construction in China have continuously reshaped the value chain of the pharmaceutical industry. In addition, with the continuous progress of science and technology, AI and other high-end technologies continue to empower the pharmaceutical industry. Venture capital and other institutions have also invested a lot of capital in pharmaceutical innovation and medical device innovation, and the financing amount of the pharmaceutical industry outside China continues to rise. At present, the pharmaceutical industry is in a period of major changes. Only by gaining insight into the development of clinical science and technology and effectively producing high-quality and efficient medical products can pharmaceutical enterprises truly develop healthily in the long term. According to Frost & Sullivan data, the global drug R & D expenditure reached US $182.3 billion in 2019, with a year-on-year increase of 4.70%, of which the R & D expenditure in drug discovery, preclinical and clinical stages reached US $38.1 billion, US $20.6 billion and US $123.6 billion respectively. From 2015 to 2019, the compound growth rate of global drug R & D expenditure will reach 5.00%, while the compound growth rate will remain at 4.50% from 2019 to 2024. Global drug R & D expenditure is still expected to maintain steady growth. Compared with the world, the growth rate of China’s drug R & D expenditure is higher than the global average. In 2019, China’s drug R & D expenditure was about US $21.1 billion, with a year-on-year increase of 21.30%. The compound growth rate in the past five years was 19.10%. It is expected to maintain a compound growth rate of 17.70% in the next five years, much higher than the global average. In the future, with the improvement of China Meheco Group Co.Ltd(600056) enterprises’ independent innovation ability, The growth potential of pharmaceutical R & D investment is huge.

6. China’s cro + cdmo industry as a whole has maintained a high outlook, and its global influence has been increasing

Under the influence of the continuous growth of China Meheco Group Co.Ltd(600056) market demand, the intensification of the segmentation trend of the pharmaceutical industry, the implementation of consistency evaluation standards, the promotion of hierarchical diagnosis and treatment and the further strengthening of the globalization trend of cro industry, Chinese cro enterprises enhance their service competitiveness by investing R & D funds and attracting high-end R & D talents at home and abroad, It has become an indispensable part of the new drug R & D industry chain and the driving force for the rapid development of China’s cro industry. According to Frost & Sullivan data, the compound growth rate of China’s cro market reached 29.20% from 2014 to 2018, the market scale in 2018 was close to US $5.8 billion, the market scale is expected to reach US $21.4 billion by 2023, and the compound growth rate from 2018 to 2023 is expected to reach 29.60%. China’s cro industry will achieve leapfrog development in the future.

Scale and growth rate of China’s cro market from 2014 to 2023

Source: Frost & Sullivan

With the increasing difficulty of new drug research and development and the increase of production cost, cdmo industry came into being. In the drug R & D stage, the core value of cdmo industry is to improve R & D efficiency, reduce R & D cost and improve R & D success rate; In the drug commercialization stage, the core value of cdmo industry is to reduce production costs and improve production efficiency through continuous process optimization. Globally, due to the high cost of manpower and raw materials in Europe and the United States, the trend of cdmo production capacity transfer from Europe and the United States to emerging markets is very obvious in recent years. The continuous transfer of overseas production capacity has gradually become the core driving force of China’s cdmo industry. In addition, with the rise of innovative drugs in China, pharmaceutical enterprises have gradually increased their investment in innovation and R & D, and the demand for cdmo has gradually increased, which has further contributed a large growth space to China’s cdmo industry. According to Frost & Sullivan data, the scale of China’s CMO / cdmo industry reached US $2.4 billion in 2018, of which the ratio of small molecule drugs to biological agents is close to 2:1, which is expected to reach about 1:1 by 2023. Benefiting from the improvement of China’s R & D heat of biological agents, the market growth rate of CMO / cdmo industry will further increase in the future. It is expected that the market scale is expected to reach US $8.5 billion in 2023, and the compound growth rate from 2018 to 2023 will reach 28.90%.

China’s CMO / cdmo market scale and growth rate from 2014 to 2023

Source: Frost & Sullivan

(2) Purpose of this release to specific objects

1. Expand and strengthen the main business, improve the testing service capacity, and consolidate and enhance the company’s market position

After years of rapid development, the company’s business level, enterprise scale and social credibility are among the best in the national inspection and testing industry. In recent years, it has continued to develop steadily at a high growth rate. However, as the laboratory site and equipment service capacity tend to be saturated, in order to enhance the driving force for further development and meet the increasingly diversified testing service needs of the market, the company will use the funds raised by issuing shares to specific objects to further expand production capacity and invest in site construction and equipment in Qingdao, Xi’an and other regions based on existing experience and advantages, Improve the testing technology service capability, strengthen the scale advantage, and consolidate and enhance the company’s market position.

power

As a large national comprehensive inspection and Certification Group, the company is in a leading position in ensuring traditional business



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