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in the just-concluded financial reporting season, wandong medical delivered a good answer sheet.

in addition to recording a record revenue of 700 million yuan, wandong medical also achieved double-digit growth in net profit in the first half of the year, with net profit attributable to shareholders increasing by 11.44% year-on-year to 84.7418 million yuan, and non-net profit increasing by 15.57% year-on-year to 81.1167 million yuan.

however, such performance still failed to boost market confidence in wandong medical. after the semi-annual report, wandong medical's stock price remained stable and continued to fluctuate at a low level.

wandong medical can be regarded as a "veteran" in the domestic medical imaging equipment industry. its predecessor was the beijing medical x-ray machine factory established in 1955. however, such a senior national brand has changed hands five times in its 70-year development history, and has been displaced and almost reduced to a bargaining chip for capital.

it was not until the entry of midea group in 2021 that this old national enterprise gradually stabilized. missing the golden period of development has resulted in wandong medical's competitiveness not being significantly improved in recent years, which can only be regarded as a pity.

01

wandong medical has changed ownership five times

wandong medical's earliest history can be traced back to the beijing medical x-ray machine factory, and it can be regarded as a pioneer in medical imaging in china.

before the 1990s, beijing medical x-ray machine factory always represented the forefront of china's medical imaging technology. in 1958, beijing medical x-ray machine factory successfully trial-produced china's first 400 ma rotating anode tube x-ray machine and achieved mass production; in 1986, it successfully developed china's first 1250 ma large x-ray product; in 1989, the first dsa developed and produced in china was installed in the beijing military region general hospital.

at that time, the beijing medical x-ray machine factory not only had strong r&d capabilities, but also attracted much attention from the capital market.

in 1994, beijing medical x-ray machine factory successfully merged with beijing medical electronic instrument factory and beijing medical air conditioning equipment factory to jointly establish beijing wandong medical equipment co., ltd. in the second year after the reorganization, wandong medical's revenue exceeded 100 million yuan, and it was successfully listed on the a-share market in 1997.

relying on its leading technological research and development advantages at the time, wandong medical maintained excellent double-digit growth for a long time after its listing, becoming a veritable growth stock.

figure: wandong medical's revenue and growth rate, source: jinduan research institute

there is always a calm in the air before the storm. behind the steady development of wandong medical, capital has been surging for a long time. the capital battle surrounding it has actually quietly begun, and this battle has lasted for 20 years.

at that time, wandong medical's controlling shareholder was beijing pharmaceutical group co., ltd. (hereinafter referred to as "beijing pharmaceutical group"). in 2002, bio-bio, which mainly engaged in biochips, hoped to go public through a backdoor listing of wandong medical, so it acquired 64.86% of wandong medical's shares from beijing pharmaceutical group and became the nominal controlling shareholder.

however, due to the transfer of state-owned assets, this restructuring plan has not been approved, which forced bio-pharma to transfer wandong medical's equity back to beijing pharmaceutical group in 2006. thus, wandong medical's first restructuring failed. after four years of twists and turns, the control of wandong medical returned to beijing pharmaceutical group.

what all investors did not expect was that this restructuring attempt was just the beginning of wandong medical's turbulent journey.

one year later, in 2007, china resources group acquired 50% of the shares of beijing pharmaceutical group held by huayuan life and became the new actual controller of wandong medical. wandong medical welcomed its third "owner". with the overall acquisition of beijing pharmaceutical group by china resources group in 2011, wandong medical naturally became a member of china resources group and was renamed "china resources wandong" in 2013.

at that time, in addition to acquiring wandong, china resources also acquired shanghai xie group and ahua medical equipment, and established a medical equipment sector, ambitiously wanting to build an empire in this field. however, due to internal integration problems, china resources' medical equipment sector has been unable to achieve the effect of 1+1>2, and soon decided to "strategically withdraw from the medical equipment business" in 2014, so it packaged and sold its related companies. as one of its core assets, china resources wandong was of course the first to bear the brunt.

after being separated from china resources group, wandong medical joined the yuyue group. in 2015, yuyue technology spent 1.142 billion to take over wandong's 51.51% stake, officially becoming a private enterprise and changing its name back to "wandong medical". this merger was not only the largest merger in the medical device field in china at the time, but also kicked off the overall sale of competitive assets by central enterprises after the third plenary session of the 18th cpc central committee.

wandong medical was also not "favored" by its fourth "owner". since 2017, yuyue medical has sold wandong's equity on a large scale, and sold 29.09% of its equity to midea group in 2021. calculated at a transfer price of 14.6 yuan per share, the transaction involved an amount of 2.297 billion yuan, breaking the record for domestic medical enterprise mergers and acquisitions that year.

after five changes of ownership due to mergers and acquisitions, wandong medical has gradually lost its former glory.

02

becoming a capital bargaining chip

from its first acquisition in 2002 to the formal acquisition by midea group in 2021, wandong medical has been wandering in the capital market for 20 years. although new capital has continued to enter the market during this period, few of them are really dedicated to operating the company, and most of them regard it as a capital bargaining chip.

during the bgi period, its purpose of acquiring wandong medical was very clear, which was to go public through a backdoor listing. when it was found that the backdoor listing was hopeless, it did not show any attachment to wandong medical, let alone provide guidance and boost to its business. this also led to the confused operating conditions of wandong medical during this period. zhang danshi, the then secretary of the board of directors of wandong medical, once told the media, "since no agreement has been reached on the restructuring and there is no clear major shareholder, not only does the daily operation lack a clear development direction, but even the share reform cannot be implemented at all."

during the period of china resources wandong, although the strategy began to have a clear direction, the progress was not smooth. at that time, china resources' medical device sector had two major players, wandong and shangxie, but they had never been well integrated together, and even fought each other and undermined each other. in the end, the medical device sector became a discarded piece in the chess game of china resources pharmaceutical m&a and integration, becoming a typical failure case.

during the yuyue medical period, although they seemed to be "peers" in the field of medical devices, wu guangming, who had always made his fortune by capital speculation, obviously did not formulate a clear long-term planning route for wandong medical. just two years after taking over, he sold 22% of the shares to yu rong, the actual controller of meinian healthcare, and 29.09% of the shares to midea group. in the two equity sales, yuyue group received 3.954 billion yuan, a huge profit of 2.812 billion yuan compared with its initial investment of 1.142 billion yuan.

the laissez-faire development brought about by the long-term lack of attention has led to wandong medical not enjoying too many bonus resources under any owner. in recent years, wandong medical's lukewarm development has long been unable to keep up with the development speed of the industry and its peers. according to the "china medical device blue book (2023)", the scale of china's medical device market will increase from 370 billion yuan in 2016 to 983 billion yuan in 2022, with an annual compound growth rate of 17.69%, while wandong medical's annual compound growth rate of revenue in the same period was only 5.5%.

figure: wandong medical's revenue and growth rate in the past 20 years, source: jinduan research institute

after 20 years of wandering, wandong medical has gradually been surpassed by latecomers such as mindray medical and united imaging medical.

03

the future of wandong

for wandong medical, midea group is a good destination.

over the years, midea group has always emphasized the new growth strategy of "second curve, second engine", and medical devices are the key areas that midea values. if wandong can show good growth potential, it is very likely that midea group will inject more resources.

on the other hand, as my country's aging population becomes increasingly serious, the demand for medical imaging equipment is also increasing. according to the national health commission's forecast, by around 2035, the number of middle-aged and elderly people aged 60 and above in my country will exceed 400 million. the middle-aged and elderly are a high-risk group for chronic diseases, and the diagnosis of many chronic diseases requires imaging equipment, which brings incremental market space to the medical imaging diagnosis industry. at present, my country's medical imaging equipment per million people has a large room for improvement compared with developed countries, and the overall per capita ownership is only equivalent to 20%-30% of that in the united states and japan.

whether it is the objective environment or the demands of midea, it is an opportunity for wandong medical. but it is not easy to seize such an opportunity. judging from the current business structure, not only midea group needs a second curve, but wandong medical also needs a second curve.

although wandong medical has multiple product categories such as digital radiography (dr), x-ray computed tomography (ct), and magnetic resonance imaging (mr), its revenue is still highly dependent on the dr product line. in the first half of 2024, the company's dr sales volume and sales market share ranked first among all brands, but the market share of ct and mr was not high.

moreover, the sales of wandong medical's main product are declining significantly. in 2023, its dr product shipments have dropped from 1,800 sets at the peak to 1,272 sets, a drop of nearly 30%. in the face of the decline in dr sales, wandong medical once said that after ten years of rapid development, dr equipment has been basically popularized in hospitals at all levels in china, and the domestic dr market has begun to enter a stock renewal cycle. this means that dr has almost lost the opportunity for rapid growth.

figure: wandong medical dr shipments, source: jinduan research institute

with the growth of the core dr track reaching its peak, the future of wandong medical will be mainly affected by two factors: one is to enter more tracks, and the other is to go overseas.

for wandong medical, the most urgent thing is to find new growth points and new opportunities in weak areas such as ct and mr, which is also the focus of the market. for example, the most promising thing for wandong medical is its "liquid helium-free" mr technology.

in january 2022, wandong medical formed a consortium with more than a dozen other construction units, broke through and mastered the "liquid helium-free" mr technology, launched the world's first liquid helium-free nuclear magnetic resonance, and settled in beijing jishuitan hospital. driven by this news, wandong medical's stock price once exceeded 25 yuan in 2023, with a market value of more than 17 billion yuan. however, although the "liquid helium-free" mr solved the "liquid helium" bottleneck problem, it could not immediately improve wandong medical's performance, so the stock price also fell back to the current 12 yuan.

in terms of going overseas, wandong medical has also been planning for many years and has made some progress. in 2023, wandong medical's international revenue accounted for 11.19%, both of which set a record high, but in general, the proportion and absolute amount are still small. according to wandong medical's semi-annual report, the company has established offices in uzbekistan in central asia and egypt in africa, firmly promoting localization layout.

midea group's attitude towards wandong medical depends entirely on wandong's own efforts. it urgently needs a "pledge of allegiance": whether it can grab the mr market share from united imaging medical and win orders in more overseas markets. as long as wandong medical can prove its own value, midea group is expected to continue to inject resources.

the needs of both parties are in line with each other: wandong medical needs a stable financial backer, while midea group also needs an outlet for medical resources.