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Zebra Consumption Shen Tuo

In just two months, Aier acquired 87 ophthalmic medical institutions. The ophthalmic M&A machine of Aier has accelerated again.

As a private ophthalmology giant, Aier Eye Hospital has been seeking large-scale expansion through the incubation model of in vitro industry funds. According to the company's previous statement, as the company's size becomes larger and its funds become stronger, its carrying capacity will become higher and higher, and the industry fund model is only a phased model.

However, at a time when scale is king, Aier's mergers and acquisitions will not slow down for the time being.

Strike Again

The ophthalmology M&A market is in turmoil again. On the evening of July 29, the "big eater" Aier Eye Hospital (300015.SZ) announced that it was preparing to swallow up the controlling stakes of 35 ophthalmology hospitals including Humen Aier in one go, with a total consideration of 898 million yuan.

Except for Fuzhou Aier, which is located in the provincial capital, the rest of these ophthalmology hospitals are located in prefecture-level cities and county towns in the central and western regions.

In 2023, the above 35 hospitals will have a total revenue of 749 million yuan, a year-on-year increase of 35.31%. Among them, at least 14 targets were still in a loss last year. Luliang Aier Eye Hospital, Luzhou Longmatan Aier Eye Hospital, and Liupanshui Aier Eye Hospital had net losses of 2.3473 million yuan, 2.0824 million yuan, and 2.3426 million yuan, respectively.

Aier Eye Hospital is optimistic that these target hospitals are at the stage of breaking even or turning losses into profits, and expects their future performance to maintain a sustained growth trend.

The company's acquisition of these sinking market ophthalmology hospitals is intended to quickly improve the regional market layout, form economies of scale, deepen the tiered chain system across the country, and consolidate its leading position.

In the past two years, after completing its layout in large and medium-sized cities, Aier Eye Hospital has continued to increase its investment in the lower-tier markets.

At the end of May this year, the company spent 1.344 billion yuan to acquire 52 ophthalmology institutions including Zhoukou Aier and Chongqing Eye and Optometry. Except for Chongqing Eye and Optometry and Nanchang Hongcheng Aier, the rest were all from prefecture-level cities and counties. In 2023, the company launched two mergers and acquisitions, acquiring a total of 26 medical institutions, most of which were located in the sinking market.

However, the news of the merger did not cause much stir in the secondary market. At the close of yesterday, Aier Eye Hospital's stock price rose only slightly by 0.79%.

M&A Acceleration

The reason why Aier Eye Hospital has become a giant in private ophthalmology is that internal growth + external mergers and acquisitions are the company's powerful tools for large-scale development. After years of practice, the company has summed up a mature business model.

The usual practice is for the company to export its brand and management resources to promote the healthy growth of potential targets, and then wait for them to grow and mature before the company can "pick the peaches".

The same is true for this merger and acquisition. These acquired hospitals were all nurtured by the partner institutions in advance, and after they passed the break-even point, they were incorporated into the listed company.

Take Yuncheng Aier Eye Hospital as an example. It was established in February 2018. In August of that year, Hunan Liangshi Changyin entered the controlling stake. This time, the acquisition of its 51% equity was priced at 53.04 million yuan. Hunan Liangshi Changyin was established in January 2018 and controls the 13 medical targets of this acquisition.

In addition, accompanying the growth of these ophthalmic medical targets are Hunan Liangshi Zhongxing, Liangshi Chenxing and Tianjin Aisin. The largest investor behind the three is Ping An Huitong, which is a subsidiary of Ping An Fund.

Among the above-mentioned four partnership institutions, Lhasa Liangshi, a subsidiary of Aier Eye Hospital, has a capital contribution share of approximately 19%.

How can potential acquisition targets achieve sustainable operating capabilities? Aier Eye Hospital has built a platform for clinical, scientific research, teaching and even training to help potential targets grow and mature.

Taking the 30 ophthalmology hospitals acquired by the company in 2020 as an example, after being incorporated into the listed company system, even during the special period of three years, its overall net profit compound annual growth rate still exceeded 28%.

In some prefecture-level cities, Aier Eye Hospital has shown strong ability to attract money. In 2023, the annual revenue of Hengyang Aier, Binzhou Hubin Aier, Dongguan Aier, etc. has exceeded 200 million yuan.

Through continuous mergers and acquisitions, the company's scale has grown significantly. According to the company's official website, as of the end of last year, the company had 881 branded hospitals, ophthalmology centers and clinics around the world, of which 750 were in mainland China (including 439 under listed companies and 311 under industrial merger and acquisition funds). Among them, prefecture-level cities and county-level hospitals accounted for about 80%, basically achieving a nationwide layout.

As of the end of last year, the company's initial amount of goodwill generated by acquisitions was approximately RMB 8.065 billion, accounting for 26.72% of total assets, and a cumulative goodwill impairment provision of RMB 1.532 billion had been made.

The road to rise

Myopia, dry eyes and cataracts are the three main consumer groups in the ophthalmic medical market. According to a Shanxi Securities research report, the scale of the domestic ophthalmic medical service market will reach 252.15 billion yuan in 2025.

This golden track has spawned many listed companies such as Aier Eye Hospital, Pure Eye Hospital, He’s Eye Hospital, and Huaxia Eye Hospital.

Aier Eye Hospital is the fastest growing one. According to a report by Zhiyan Consulting, in 2022, Aier Eye Hospital will have a market share of approximately 11.3% in the ophthalmic medical service market, ranking first in the industry.

In 1997, after suffering the blow of Hainan's real estate bubble and several business setbacks, the company's founder Chen Bang took out his only 30,000 yuan and entered the ophthalmic medical industry through the "hospital within a hospital" model.

Around 2000, the “hospital within a hospital” encountered policy adjustments, and Chen Bang chose to open an independent ophthalmology hospital. In 2001, the first Aier Eye Hospital was established in Liaoning, and then quickly expanded to Chengdu, Changsha and Wuhan.

In 2009, Aier Eye Hospital listed on the Growth Enterprise Market with 19 ophthalmology hospitals, becoming the first private listed hospital in the A-share market.

After reviewing, we found that the company's growth has gone through three stages. From 2002 to 2008, it was an important period for starting and exploring the hierarchical chain model; from 2009 to 2013, it embraced the capital market and achieved further development.

The company started to develop faster in 2014, thanks to its original model of listed company + PE fund. PE provides money, the company provides relevant resources and management output, and the newly built hospital goes through a 1-5 year incubation period before the company takes it under its wing. The PE fund gets corresponding benefits, while the listed company expands its scale.