\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 51 B-Soft Co.Ltd(300451) )
Key investment points:
The company announced that on May 12, 2022, Ge hang and its concerted actors Fuding Jiaying, Zhou Jianxin and its concerted actors Xinsu technology and Tongsu investment signed the share transfer agreement with Philips. Philips transferred 155 million shares of the company (accounting for 10.00%) at the price of 7.90 yuan per share, becoming the second largest shareholder of the company.
Ge is still the actual controller of the company. According to the announcement, the shareholding ratio of Ge hang, chairman of the board, and Fuding Jiaying (the core employee stock ownership platform before listing) will be reduced from 19.23% before the transaction to 14.23%. Ge Hang is still the controlling shareholder and actual controller of the company, and Fuding Jiaying no longer holds the equity of the company. Limited by the foreign equity of listed companies, Philips cannot become the actual controller of the company. In addition, Xinsu technology and Tongsu investment involved in the transaction are employee stock holding companies of Huikang iotian (formerly Botai), with a total transfer of 5.00% equity of the company.
Due to the need of personal funds, Ge hang has recently reduced its holdings for many times since December 23. At the same time, its pledged equity is also continuously decreasing. Before this transaction, Ge Hang still had 1156761 million Pledged Shares, accounting for 52.35% of its direct shareholding; Meanwhile, 29.9 million shares of Fuding Jiaying are pledged, accounting for 38.81% of its shares. We can see that the company’s share price fell from the highest 16.14 yuan in July 2020 to 5.63 yuan on April 28, 2022, while the lowest reduction price of Ge hang was 5.46 yuan on April 29, obviously for the need of closing positions after the decline of share price. Therefore, we believe that this agreement transfer can better alleviate the capital demand of Ge hang and play a positive role in maintaining the equity stability of the company. With the progress of this transfer, the pledge of the shares of Ge hang and Fuding Jiaying was released again on May 16. After decompression, all the shares of Fuding Jiaying were released from the pledge. Ge hang has 8.45 million shares released from the pledge, and 48.52% of the shares are under the pledge. It is expected to further release the pledge with the funds in place.
In the last year, the company has planned two important equity trading events. The first was the issue of ” Winning Health Technology Group Co.Ltd(300253) to B-Soft Co.Ltd(300451) to all shareholders of B-Soft Co.Ltd(300451) by issuing A-share shares to B-Soft Co.Ltd(300451) and merging B-Soft Co.Ltd(300451) ” announced on July 19, 2021 (announced on July 24 that the reorganization failed due to “both parties to the transaction can not reach an agreement on the core terms”), and the other was the shareholding of Philips. It can be seen that the objects of the company’s choice of restructuring are well-known companies in the industry. Behind the choice of trading, it is also the recognition of the capabilities of both parties. At the same time, it is expected that more synergy will be generated in the future business.
Philips made a premium acquisition at a price of 1224.5 million and became a strategic investor of the company. It will be committed to enhancing the company’s ability of market expansion and product innovation and enhancing the company’s core competitiveness in the field of medical informatization. The cooperation between the company and Philips is expected to focus on two aspects:
(1) Philips products and technologies can be promoted and localized with the help of the company’s implementation team, so as to better meet China’s norms and regulations, give customers more product choices, and promote the product integration of both sides;
(2) Philips’s resources and channels can help the company expand its products overseas and give full play to the advantages of interconnection of products in hospitals and public health terminals. With this agreement transfer, the company will further confirm and sign the future cooperation agreement with Philips. More details need to be further confirmed after the agreement is signed.
From the layout of Philips in the medical end:
(1) in the field of medical imaging equipment specialized by Philips, the global three giants Ge, Philips and Siemens (“GPS”) have a global market share of 60% – 70%. As the segment market with the highest technical barrier in the medical device industry, medical imaging equipment has shown an oligopoly situation for a long time. In the Chinese market, domestic equipment is currently mainly distributed in medium and low-end models, and the demand mostly comes from third and fourth tier cities. However, GPS still firmly grasps the demand for high-end models in tertiary hospitals in core markets such as first tier cities.
(2) Philips has more than 1500 medical IT customers in the world, has deep product experience overseas, has done himss7 level and 6 level business, and has obvious advantages in CDSs, medical technology system, interface group, etc.
From the background of Philips acquisition, it is noteworthy that:
(1) China is the second largest market of Philips, and Philips China Innovation Center is one of the four innovation centers in the world. Therefore, Philips is committed to combining China’s clinical reality and working closely with the local ecosystem to bring rich innovative solutions in line with China’s clinical reality to Chinese professional customers.
(2) Philips business is gradually downsizing. By 2019, it has completely stripped off its starting lighting business. In 2020, it began to seek to sell the home appliance business and fully focus on the medical and health care business. At the same time, Philips is also constantly carrying out mergers and acquisitions and cooperation to expand its ecosystem in health care business.
(3) under the trend of domestic substitution, Chinese manufacturers are gradually rising and listed one after another. In the face of such a market environment, international giants are also actively launching more overall solutions to improve the moat in the field of medical technology. Philips is accelerating its digital transformation from an equipment supplier to a solution supplier integrating hardware, intelligent systems, software and services. In addition, Philips implements the localization strategy in China and enriches the “localization” product portfolio in the Chinese market through localization R & D and production.
(4) as early as 2013, Philips began to develop in the field of AI, with an annual investment of 1.7 billion euros for R & D, of which 60% was used for software development. At present, more than 80% of medical data comes from medical images, and 70% of clinical diagnosis needs to rely on medical images. Philips can provide a solid data foundation for its medical information solutions by taking advantage of its traditional advantages in medical images. At the same time, China’s huge population base provides sufficient nourishment for medical AI, and scarce medical resources create unique conditions for the application of AI.
(5) China’s Medical IT market has a high degree of localization, but the overall level of China’s medical treatment is far behind that of European and American developed economies. At the same time, it started late in medical informatization. Taking electronic medical records as an example, in 2020, the average rating of electronic medical records in Chinese hospitals was 2.43. According to the data of arterial orange, the level 0-2 of Chinese electronic medical records corresponds to the first stage of American electronic medical records, and the level 3-4 corresponds to the second stage of American electronic medical records, while the United States reached the first, second and third stages in 2011, 2013 and 2015 respectively
Philips also has two investments in China, which can be used as a reference for this cooperation between the two sides. It can be seen that Philips has been looking for localized cooperation in China and has also made more resource investment and sharing in the cooperation.
(1) in February 2022, Sano United Medical announced its acquisition of Philips strategic investment. After the investment, the founding team of Sano United still holds absolute control. With domestic PET / CT molecular imaging products as the core, Sano United products is the only complete machine manufacturer in China with the localization ability of all core components of pet equipment, which coincides with Philips. Philips’s investment in Sano alliance is also a specific practice of its localization strategy.
(2) in 2004, Philips and Neusoft medical jointly funded the establishment of Neusoft Philips. Philips holds 51% of the shares. The medical imaging equipment produced by the joint venture is sold under the brands of “Neusoft” and “Philips” through their respective channels, mainly to the middle and low-end markets represented by Western Regions or rural areas of China. The establishment of the joint venture provides Neusoft with excellent product resources to explore the global market in the field of medical equipment, and expands and enriches clinical practical products and related product lines for Philips. In 2013, Neusoft medical acquired 25% of the original equity of Neusoft Philips held by Philips and became the controlling shareholder of the joint venture. Philips also transferred the remaining 26% equity of the joint venture. After the completion of the transaction, the joint venture maintained normal operation, and Neusoft and Philips continued to maintain a partnership. In terms of intellectual property rights, both parties share the joint venture’s own intellectual property rights through joint ownership and licensing, and Philips allows Neusoft medical and the joint venture to use Philips background intellectual property rights within their original scope. At the same time, Philips promises to exclusively purchase ultrasound products confirmed by both parties from the joint venture and order CT products with a value of no less than 405 million yuan within 2 years after the completion of the transaction. In addition, both parties will continue to supply medical equipment parts, provide customer service and support to each other to meet the sustainable development of each party’s business.
Compared with the price of Ping An’s shares in 2020, although Philips is purchased at a premium, the purchase price of 7.90 yuan / share is very cost-effective compared with Ping An’s price of 13.356 yuan / share (corresponding to the current reinstatement price of 11.43 yuan / share).
Maintain the investment rating of “buy” of the company. Judging from the company’s performance and orders in recent years, the company’s development continues to be good. At the same time, through this equity transfer and in-depth cooperation with Philips, it is expected to further improve the product side and obtain greater market share. It is estimated that the company’s EPS in 22-24 years will be 0.33 yuan, 0.46 yuan and 0.63 yuan respectively. Calculated according to the closing price of 7.52 yuan on May 20, the corresponding PE will be 22.98 times, 16.22 times and 11.90 times.
Risk tip: the cooperation with Philips is not progressing as expected; The aggravation of the epidemic situation affects the implementation of the project; The shareholding ratio of major shareholders is low.
