Maland Medical Prepares for STAR Market IPO Amid Declining Product Prices and Forecasted Drop in Non-GAAP Net Profit

　　Editor's NoteOn January 26, Medlander Medical Technology Inc. (hereinafter referred to as "Medlander") will have its initial public offering reviewed by the Issuance Examination Committee. The sponsor institution is Nanjing Securities Co., Ltd., with Li Jianqin and Zhang Hong as the sponsor representatives. Medlander plans to list on the Shanghai Stock Exchange's STAR Market, intending to issue 25 million shares publicly, which will be no less than 25% of the total share capital after this issuance. The company aims to raise 574 million yuan in funds, which will be allocated respectively for the Medlander Headquarters Production Base Construction Project, R&D Center Construction Project, and Marketing Service and Information Technology Construction Project.

From January 2018 to June 2021, Medlander achieved operating revenues of RMB 143 million, RMB 256 million, RMB 337 million, and RMB 154 million respectively. The net profit attributable to the parent company's owners was RMB 55.9904 million, RMB 106 million, RMB 122 million, and RMB 55.2727 million respectively. The net profit attributable to the parent company's owners after deducting non-recurring gains and losses was RMB 54.777 million, RMB 101 million, RMB 115 million, and RMB 48.8329 million respectively. The net cash flow from operating activities was RMB 81.3054 million, RMB 104 million, RMB 131 million, and RMB 84.0881 million respectively.

From January to September 2021, the company's operating revenue was 231 million yuan, a year-on-year decrease of 0.51%; the net profit attributable to the shareholders of the parent company was 77.5431 million yuan, a year-on-year decrease of 14.93%; the net profit attributable to the shareholders of the parent company after deducting non-recurring gains and losses was 69.1811 million yuan, a year-on-year decrease of 20.97%; the net cash flow generated from operating activities was 95.2534 million yuan, a year-on-year decrease of 5.05%.

Medlander's Non-Recurring Net Profit Fell Last Year. The company expects to achieve operating revenue of 330 million yuan to 340 million yuan for the whole year of 2021, representing a change of -1.94% to 1.03% compared with the same period last year; it expects to achieve net profit attributable to shareholders of the parent company of 118 million yuan to 122 million yuan, representing a change of -3.23% to 0.05% compared with the same period last year; it expects to achieve net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses of 104 million yuan to 108 million yuan, representing a change of -9.68% to -6.21% compared with the same period last year.

The average selling price of Medlander's main products has been decreasing year by year after 2019. During the reporting period, the unit prices of the company’s pelvic floor diagnosis and treatment series were 39,900 yuan/unit, 46,000 yuan/unit, 42,500 yuan/unit, and 37,400 yuan/unit. The unit prices of the company’s postpartum recovery series were 46,100 yuan/unit, 54,900 yuan/unit, 49,900 yuan/unit, and 47,200 yuan/unit.

From January 2018 to June 2021, the gross profit margin of Medlander's main business declined, respectively amounting to 79.41%, 80.16%, 76.17%, and 74.25%. It remained basically stable in 2018 and 2019. The gross profit margin in 2020 decreased by 3.99 percentage points compared with that in 2019, and the gross profit margin from January to June 2021 decreased by 1.92 percentage points compared with that in 2020.

According to Yicai News, Medlander Medical Technology Inc. sold an enterprise controlled by its actual controller and major shareholder to another related party at a low price less than a year after acquiring it. In April 2017, Yang Ruijia, Shi Zhihuai, and Zheng Weifeng, three founding shareholders of Medlander, jointly established Nanjing Maidou Health Management Co., Ltd. (hereinafter referred to as "Maidou Health"), which became the distributor for Medlander's home-use series of pelvic floor and postpartum rehabilitation equipment. In September 2018, Yang Ruijia transferred his 65% stake in Maidou Health (corresponding to a registered capital of 650,000 yuan), Shi Zhihuai transferred his 20% stake in Maidou Health (corresponding to a registered capital of 200,000 yuan), and Zheng Weifeng transferred his 13% stake in Maidou Health (corresponding to a registered capital of 130,000 yuan) to Medlander; they also agreed that Zheng Weifeng would transfer his 2% stake in Maidou Health (corresponding to a registered capital of 20,000 yuan) to Wu Henglong (an unrelated individual), with all transfer prices being 1 yuan per unit of registered capital. In August 2019, Medlander transferred its 98% equity interest in Maidou Health (corresponding to a registered capital of 2.94 million yuan) to Zheng Weifeng for 2.69843 million yuan, representing an impairment of 8.22% compared to the acquisition/investment cost from a year earlier. At that time, Zheng Weifeng was a major shareholder holding more than 5% of Medlander’s shares, constituting a related-party asset transfer. Subsequently, transactions between Medlander and Maidou Health were disclosed as related-party sales. Additionally, Medlander acquired a negatively-valued company at a premium. In June 2020, Wang Kai and He Qi, financial investors of Shenzhen Yisu Medical Technology Co., Ltd. (hereinafter referred to as "Yisu Medical"), transferred their entire stakes in Yisu Medical to Medlander at a price of 2.97 yuan per unit of registered capital; simultaneously, Medlander increased its capital investment in Yisu Medical by 693,800 yuan at the same price. After this acquisition, Medlander held 51% of Yisu Medical’s shares. According to an asset-based valuation, the total equity value of Yisu Medical’s shareholders was assessed at 5.9651 million yuan, increasing by 6.4193 million yuan from the book net assets of -454,200 yuan, with a growth rate of 1,413.32%. The price for Medlander to acquire 51% of the equity was 4.0802 million yuan, which was 1.038 million yuan higher than the valuation, with a growth rate of 34.12%.

According to GelonHub, currently, pilot programs for the "two-invoice system" policy for medical consumables have been carried out in provinces such as Anhui, Fujian, Shaanxi, and Shanxi. The so-called two-invoice system is a significant compression of the consumables distribution process, with the most direct impact being the elimination of a large number of distributors. At present, Medlander's product sales are still mainly through distribution, with a large and dispersed number of distributors. In 2018-2020, the company had 431, 726, and 1,040 distributors respectively, with distribution revenue accounting for over 75%. If the two-invoice system is fully implemented, it will significantly impact the company’s current business model.

　　Proposed Sci-Tech Innovation Board Listing to Raise 574 Million Yuan

Medlander mainly engages in the research and development, production, sales, and service of products related to pelvic floor and postpartum rehabilitation. The main products include pelvic floor and postpartum rehabilitation equipment, consumables and accessories, and information-based products, which are widely used in obstetrics and gynecology, maternal health care departments, gynecological departments, pelvic floor rehabilitation centers of medical institutions, as well as professional institutions such as confinement centers, postpartum recovery centers, and mother-baby centers.

The controlling shareholder and actual controller of the company are Yang Ruijia and Shi Zhihuai. As of the date of signing the prospectus, Yang Ruijia and Shi Zhihuai directly hold 25.82% and 24.19% of the company's shares respectively, and together they directly hold 50.01% of the company's shares.

To further enhance the stability of the company's control, shareholders Chen Bin, Tu Honglin, Zhou Gan, and Zhou Qin (who collectively hold 25,666,300 shares, accounting for 34.22% of the company) signed a "Unanimous Action Agreement" with the controlling shareholder and actual controller Yang Ruijia and Shi Zhihuai.

Medlander Medical Technology Inc. Plans to List on the STAR Market of the Shanghai Stock Exchange, Intending to Publicly Issue 25 Million Shares, Not Less Than 25% of the Total Share Capital After This Issuance. The Company Aims to Raise 574 Million Yuan, Allocating 369 Million Yuan for the Medlander Headquarters Production Base Construction Project, 152 Million Yuan for the Research and Development Center Construction Project, and 52.9161 Million Yuan for the Marketing Service and Information Technology Construction Project.

　　Net profit excluding non-recurring items expected to decline last year

From January 2018 to June 2021, Medlander achieved operating revenues of 143 million yuan, 256 million yuan, 337 million yuan, and 154 million yuan respectively. The net profit attributable to the parent company's owners was 55.9904 million yuan, 106 million yuan, 122 million yuan, and 55.2727 million yuan respectively. The net profit attributable to the parent company's owners after deducting non-recurring gains and losses was 54.777 million yuan, 101 million yuan, 115 million yuan, and 48.8329 million yuan respectively. The net cash flow generated from operating activities was 81.3054 million yuan, 104 million yuan, 131 million yuan, and 84.0881 million yuan respectively.

In 2018, 2019, and 2020, the company's cash dividend amounts were RMB 15 million, RMB 75 million, and RMB 42.74 million, respectively, totaling RMB 133 million.

From January to September 2021, the company's operating revenue was 231 million yuan, a year-on-year decrease of 0.51%; the net profit attributable to the shareholders of the parent company was 77.5431 million yuan, a year-on-year decrease of 14.93%; the net profit attributable to the shareholders of the parent company after deducting non-recurring gains and losses was 69.1811 million yuan, a year-on-year decrease of 20.97%; the net cash flow generated from operating activities was 95.2534 million yuan, a year-on-year decrease of 5.05%.

The company expects to achieve operating revenue of 330 million yuan to 340 million yuan for the whole year of 2021, representing a change of -1.94% to 1.03% compared to the same period last year; it is expected to achieve a net profit attributable to parent company shareholders of 118 million yuan to 122 million yuan, representing a change of -3.23% to 0.05% compared to the same period last year; it is expected to achieve a net profit attributable to parent company shareholders after deducting non-recurring gains and losses of 104 million yuan to 108 million yuan, representing a change of -9.68% to -6.21% compared to the same period last year.

　　The average selling price of products shows a downward trend.

Medlander currently mainly engages in the research and development, production, sales, and service of products related to pelvic floor and postpartum rehabilitation. Its main products can be divided into pelvic floor and postpartum rehabilitation equipment, consumables and accessories, and other products.

During the reporting period, the unit prices of the company's pelvic floor diagnosis and treatment series were 39,900 yuan/unit, 46,000 yuan/unit, 42,500 yuan/unit, and 37,400 yuan/unit, respectively.

During the reporting period, the unit prices of the company's postpartum recovery series were 46,100 yuan/unit, 54,900 yuan/unit, 49,900 yuan/unit, and 47,200 yuan/unit, respectively.

　　Gross Profit Margin Decline

From January 2018 to June 2021, the gross profit margin of Medlander's main business was 79.41%, 80.16%, 76.17%, and 74.25%, respectively. It remained basically stable in 2018 and 2019. The gross profit margin in 2020 decreased by 3.99 percentage points compared with that in 2019, and the gross profit margin from January to June 2021 decreased by 1.92 percentage points compared with that in 2020.

During the reporting period, the gross profit margin of the company's pelvic floor diagnosis and treatment series was 84.49%, 80.53%, 76.43%, and 74.33%, respectively, showing a year-on-year decline.

During the reporting period, the gross profit margin of the company's postpartum recovery series was 86.01%, 87.14%, 83.85%, and 80.52%, respectively, showing a trend of first increasing and then decreasing.

　　Related Party Transactions: Low-price Sale, Premium Acquisition

According to Yicai Xin, Medlander Medical Technology Inc. sold an enterprise controlled by its actual controller and major shareholder to another related party at a low price less than a year after the acquisition.

In April 2017, Yang Ruijia, Shi Zhihuai, and Zheng Weifeng, three founding shareholders of Medlander, jointly established Nanjing Maidou Health Management Co., Ltd. ("Maidou Health"), serving as the distributor for Medlander's pelvic floor and postpartum rehabilitation home-use device series.

In September 2018, Yang Ruijia transferred his 65% contribution in Maidou Health (corresponding to a registered capital of 650,000 yuan), Shi Zhihuai transferred his 20% contribution (corresponding to a registered capital of 200,000 yuan), and Zheng Weifeng transferred his 13% contribution (corresponding to a registered capital of 130,000 yuan) to Medlander; Zheng Weifeng also agreed to transfer his 2% contribution in Maidou Health (corresponding to a registered capital of 20,000 yuan) to Wu Henglong (an unrelated individual). The transfer price was 1 yuan per unit of registered capital.

At the same time, the registered capital of Maidou Health has increased from 1 million yuan to 3 million yuan, with an additional registered capital of 2 million yuan, all contributed in monetary form. Among this, Medlander contributed 1.96 million yuan, and Wu Henglong contributed 40,000 yuan, with an increase price of 1 yuan per unit of registered capital.

This acquisition is a merger under the same control. Afterward, Medlander controls 98% of Maidou Health's equity, and Wu Henglong controls the remaining 2% of the equity.

In August 2019, Medlander transferred 98% of its equity in Maidou Health (corresponding to a registered capital of 2.94 million yuan) to Zheng Weifeng for 2.69843 million yuan, representing an 8.22% impairment compared to the acquisition/investment cost from a year earlier. At that time, Zheng Weifeng was a major shareholder holding more than 5% of Medlander's shares, constituting a related-party asset transfer. Subsequently, the transactions between Medlander and Maidou Health were disclosed as related-party sales.

Before the transfer, Medlander also transferred a trademark to Maidou Health free of charge, and after the transfer, both parties still shared the use of the trademark.

"LAN TING" is the trademark used for the Medlander home series products, and Maidou Health has been operating the home series products. In April 2019, Medlander transferred the Class 9 trademark related to "LAN TING" to Maidou Health free of charge, with an agreement that Medlander could use it free of charge within the valid term of the trademark. From the time Medlander transferred control of Maidou Health until December 31, 2020, Medlander's free use of Maidou Health’s "LAN TING" trademark constituted a related party transaction.

In addition, Medlander also acquired a negative asset enterprise at a premium.

Medlander Medical Technology Inc. was established in May 2018 as a company focused on the research, development, production, and sales of equipment for female reproductive rehabilitation.

In June 2020, the financial investors of Yisu Medical, Wang Kai and He Qi, transferred all their shares in Yisu Medical to Medlander at a price of 2.97 yuan per registered capital. At the same time, Medlander increased its investment in Yisu Medical by 693,800 yuan at the price of 2.97 yuan per registered capital. Afterward, Medlander held 51% of Yisu Medical's shares.

In this acquisition, according to the asset-based approach assessment, the total equity value of Yisu Medical is 5.9651 million yuan, increasing by 6.4193 million yuan from the book net asset value of -0.4542 million yuan, with an increase rate of 1,413.32%. Medlander's purchase price for acquiring 51% equity is 4.0802 million yuan, which is 1.038 million yuan higher than the assessed value, with an increase rate of 34.12%.