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Source: Brokerage China
The actual controller of "Yamao" was fined 1 million yuan.
Tongce Medical , known as "Yamao", has seen its share price rise rapidly in the past two years. In just over a year, the share price has risen from no more than 100 yuan to 421 yuan. However, due to lower-than-expected profits, penalties from regulatory authorities, and rumors of centralized procurement, Tongce Medical has lost its glory. The company's stock price has been falling, falling to 110 yuan per share in September this year, 70% off the historical high price, and the market value is less than 50 billion yuan.
Recently, Tongce Medical has made waves again due to the fact that the actual controller was punished by the regulatory authorities.
The actual controller of Tongce Medical was fined 1 million yuan
On the evening of December 23, Tongce Medical, known as the leader in private dental medical services, announced that the actual controller Lu Jianming received the "Administrative Penalty Decision" from the Zhejiang Securities Regulatory Bureau on the same day.
According to the "Administrative Penalty Decision", Lu Jianming has the following illegal facts:
Lu Jianming is the actual controller of Tongce Medical. According to Article 62 of the "Measures for the Administration of Information Disclosure of Listed Companies", other entities controlled by Lu Jianming are related parties of Tongce Medical. The non-operating financial transactions between Tongce Medical and related parties constitute related transactions.
On September 29, 2021, the board of directors of Tongce Medical plans to participate in Zhejiang Tongce No. 1 Investment Partnership (Limited Partnership) (hereinafter referred to as No. 1 Fund) with its wholly-owned subsidiary Zhejiang Tongce Maternal and Child Hospital Investment Management Co., Ltd. (hereinafter referred to as Tongce Maternal and Child) equity . No. 1 Fund is actually controlled by Lu Jianming.
html On September 30, Tongce Medical disclosed that it would invest 143 million yuan in the form of currency in the same proportion phase by phase, accounting for 28.6536% of the investment proportion of Fund One. Fund One will acquire the equity of Tongce Maternity and Children at the same price, realizing the essence of the transaction of exchanging the equity of the subsidiary for 28.6536% of the equity of Fund One.According to enterprise Chacha information, No. 1 Fund was established in September 2017 with an original registered capital of 200 million yuan and a paid-in of 3 million yuan to make special investments in maternal and child medical-related industries. Judging from the equity structure , Lu Jianming’s investment ratio is 30.35%, and Tongce Medical’s investment ratio is 28.65%.
On October 19, Tongce Medical paid a capital contribution of 143 million yuan to No. 1 Fund. On the same day, No. 1 Fund transferred 143 million yuan to other entities controlled by Lu Jianming. The funds were transferred through multiple channels and were ultimately used for bank repayments.
On December 30, No. 1 Fund paid 143 million yuan to Tongce Medical for the equity transfer for the acquisition of Tongce Maternal and Child.
It is not difficult to find that during the above process, Tongce Medical’s capital contribution of 143 million yuan to Fund No. 1 was used to repay other entities controlled by Lu Jianming to the bank from October 19 to December 30, 2021, constituting non-operating capital transactions between related parties, which is a major event specified in paragraph 1 and paragraph 2 of the Securities Law.
The Zhejiang Securities Regulatory Bureau stated that Lu Jianming, as the actual controller of Tongce Medical, organized and arranged the transfer of relevant funds and failed to inform the company of the relevant situation in a timely manner, resulting in the company's failure to perform its information disclosure obligations in a timely manner.
The above-mentioned illegal facts were proved by company announcements, relevant agreements, financial vouchers and bank information, and inquiry records, which were sufficient to confirm that it was decided to impose a fine of 1 million yuan on Lu Jianming.
According to the company’s announcement, the administrative penalty imposed on and is the actual controller. The final results of the relevant matters in the “Notification of Case Filing” have been disclosed on November 19, 2022. It is an administrative penalty against the actual controller personally and will not affect the company’s normal production and operation activities.
Institutional investors are divided
Tongce Medical has always been a heavy target of institutional investors due to its vast potential market size and industry leading position.
According to the analysis of CITIC Securities research report, the private dental medical service market has grown rapidly in recent years. Frost Sullivan data shows that the private dental medical service market size was 83.1 billion yuan in 2020 and is expected to reach 241.4 billion yuan in 2025 (the compound growth rate from 2020 to 2025 is 23.3%).
However, contrary to expectations, Tongce Medical's performance has fluctuated in recent years due to the impact of the epidemic.Since the fourth quarter of 2021, the company has achieved net profits attributable to the parent company of 83 million yuan, 166 million yuan, 129 million yuan, and 220 million yuan respectively in a single quarter. The year-on-year and ratios were -10.87%, 1.25%, -30.72%, and -18.47% respectively, putting short-term performance under pressure. In addition, the company's gross profit margin in the first three quarters of 2022 was 43.1%, a year-on-year decrease of 4.8 percentage points, and the net profit margin was 28.1%, a year-on-year decrease of 4.9 percentage points, and the profit margin declined.
In fact, the bigger challenge facing Tongce Medical’s performance is that dentistry may begin to enter the era of centralized procurement and have an impact on its main business.
It can be seen from the third quarterly report that many institutional investors have certain differences on the company's future development.
As of the end of the third quarter of 2022, the top ten shareholders of Tongce Medical include 6 fund products, namely China Europe Medical Health, China Europe Medical Innovation, GF Healthcare, Huabao China Securities Medical ETF, China Europe Alpha and Gao Yi Qingrui No. 6.
GF Healthcare and the well-known private equity firm Shanghai Gaoyi Assets reduced their positions to varying degrees in the third quarter.
Tongce Medical is one of the top ten holdings of CEIBS Healthcare, CEIBS Medical Innovation, GF Healthcare, and Huabao CSI Medical ETF. Affected by lower-than-expected profits, penalties from regulatory authorities, rumors of centralized procurement, etc., Tongce Medical's stock price continued to fall, down 23.46% during the year. The latest market value was 48.8 billion yuan, and the latest price fell 64% from the highest price in history. Affected by the poor stock price performance of the fund's heavy holdings, the net value of the above-mentioned medical fund has experienced a large retracement.
In addition, there are more than 60 funds such as Nord Value Advantage Mix, China-Europe New Blue Chip Mix A, E Fund CSI Healthcare ETF, BOC Health stocks A, etc., which hold shares of Tongce Medical. The total holdings account for 15.05% of the outstanding shares.
It is worth noting that Tongce Medical has gradually lost its halo of white horse stock , and the fund holding ratio at the end of the third quarter hit a new low in the same period in the past five years.
Institutions have lowered their profit forecasts
Wind data shows that since October, a total of 17 securities firms have released profit forecasts for Tongce Medical. Among them, 11 institutions have lowered their profit forecasts for Tongce Medical in 2022 and 2023, and 5 institutions have kept their profit forecasts unchanged.
Huachuang Securities stated that considering that the impact of the epidemic is still uncertain, it has lowered the profit forecast of Tongce Medical Company. It is expected that the net profit attributable to the parent company from 2022 to 2024 will be 620 million yuan, 770 million yuan, and 950 million yuan ( The original forecast values were 730 million yuan, 920 million yuan, and 1.1 billion yuan), and the year-on-year growth rates were -12.2%, 24%, and 23.5%, corresponding to EPS of 1.92 yuan/2.39 yuan/2.95 yuan (the original forecast values were 2.28 yuan/2.87 yuan/3.43 yuan). Based on the company's historical valuation and industry trends, a target PE of 60 times in 2023 is given, corresponding to a target price of 143 yuan.
Northeast Securities stated that the company's fundamentals are stable, and the Dandelion Branch has achieved revenue contribution. However, Q3 was affected by repeated epidemics, centralized procurement of implant consumables/medical service price adjustments, and centralized procurement of orthodontic consumables. Patients have a certain wait-and-see attitude, and the industry Performance growth is under pressure, so the company's profit expectations are lowered. It is predicted that the company's net profit attributable to the parent company from 2022 to 2024 will be 604 million yuan/776 million yuan/999 million yuan respectively, EPS will be 1.88 yuan/2.42 yuan/3.11 yuan, and the current market value corresponding to PE will be 65 times/51 times/39 times respectively.
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