Core Insights - Haili Bio has reduced the acquisition price of 55% equity in Ruisheng Bio from 935 million yuan to 536 million yuan, with corresponding adjustments to performance commitments [1] - The adjusted profit commitments for 2025 and 2026 are set at 50 million yuan and 58 million yuan respectively, with a return of 399 million yuan expected from the transaction [1] - Ruisheng Bio's revenue for the first half of the year was 78.37 million yuan, with a net profit of 33.77 million yuan, both showing a decline year-on-year [1] Group 1 - The acquisition was completed in October last year, and the profit commitment for 2024 has already been met [1] - The valuation adjustment was initiated due to national policy impacts on the industry and tightening tax incentives, which affected the previously agreed equity value [1] - Ruisheng Bio's core products are natural calcined bone repair materials, and the company has faced a significant price drop in its oral product line, with a nearly 30% year-on-year decline in Q1 2025 and a 40% decline quarter-on-quarter in Q2 [1] Group 2 - Despite the performance decline, Ruisheng Bio remains an industry leader, with an increase in market share of approximately 6% to 7% for bone powder and bone membrane products compared to the same period last year [1] - The company has also submitted registration applications for two products in the first half of the year, indicating ongoing product development [1] - Haili Bio stated that the adjustment in valuation and price reduces investment costs and risks, while also mitigating the risk of failing to meet performance commitments, thereby protecting shareholder interests [1]

Core Viewpoint - The acquisition price of 55% stake in Ruisheng Bio by Haili Bio has been reduced from 935 million yuan to 536 million yuan due to the decline in Ruisheng Bio's operating performance, which helps to lower investment costs and control risks for the company and its shareholders [1][3] Group 1: Acquisition Details - Haili Bio announced the adjustment of the acquisition price for Ruisheng Bio's 55% stake from 935 million yuan to 536 million yuan, with corresponding adjustments to performance commitments for 2025 and 2026 [1] - The transaction was completed in October last year, and Ruisheng Bio has met its net profit commitment for 2024 [1] - The adjustment will result in a return of the price difference of 399 million yuan from the counterparty and is expected to reduce the goodwill formed during the acquisition [1] Group 2: Industry Context - Ruisheng Bio operates in the oral regenerative medicine sector, with its core product being natural calcined bone repair materials [2] - The industry is experiencing a "price war," with Ruisheng Bio's oral product line prices dropping nearly 30% year-on-year in Q1 2025 and a further 40% decline in Q2 [2] - Tax incentives previously applicable to Ruisheng Bio have been tightened, changing from a simplified VAT rate of 3% to a general rate of 13% [2] Group 3: Company Performance - Despite the challenges, Ruisheng Bio has increased its market share of bone powder and bone membrane products by approximately 6% to 7% due to increased shipment volumes from a new facility [2] - The company is awaiting acceptance of registration applications for two products, bone repair materials and natural bone repair materials [2] - Ruisheng Bio maintains a high gross margin while enhancing services, expanding sales to public hospitals, and optimizing internal costs [2][3]

Core Insights - The company, Haili Biological (603718.SH), reported a significant net profit increase of 172.28% in 2024, with non-recurring gains accounting for 93.82% of net profit, despite a revenue decline in Q1 2025 [2][5][8] - Haili Biological has transitioned from animal health products to human health products, leading to a substantial restructuring of its business model [2][9] Financial Performance - In 2024, Haili Biological's net profit reached approximately 1.71 billion yuan, with a notable increase attributed to asset disposals and acquisitions [4][5] - The company achieved an investment return exceeding 1 billion yuan from the sale of a 30% stake in WuXi Vaccines, which had previously generated low returns [5][6] - The sale of Yangling Jinhai at a nominal price of 1 yuan was a strategic move to eliminate ongoing losses, with the company recovering all debts owed by Yangling Jinhai [6][8] Asset Management - Haili Biological completed the acquisition of a 55% stake in Shaanxi Ruisheng Biotechnology, which is focused on oral tissue repair and regeneration materials, resulting in a goodwill of approximately 782 million yuan [9][10] - The company has prioritized finding quality projects in the oral and IVD sectors following the restructuring, although it acknowledges the challenges in identifying such opportunities [3][9] Market Dynamics - The oral vaccine market, particularly for foot-and-mouth disease, is facing increased competition and declining profitability, prompting Haili Biological to divest from Yangling Jinhai [7][8] - The revenue from Ruisheng Biotechnology in 2024 was approximately 265 million yuan, slightly below expectations, but the net profit exceeded targets [11]

Core Viewpoint - In 2024, Haili Biological (603718) underwent a significant strategic transformation by divesting long-term loss-making assets and acquiring the dental restoration materials company Ruisheng Biological, successfully shifting its focus to the human health sector. This transformation is reflected in a 172% year-on-year increase in net profit for 2024 and a turnaround to profitability in Q1 2025 with a net profit of 10.9 million yuan, a 393.11% increase year-on-year [1][2]. Group 1: Business Transformation - Haili Biological, originally established as a veterinary biological pharmaceutical factory, expanded into the human health sector in 2018 by acquiring IVD company Jiemen Biological, creating two main business segments: veterinary and IVD [2]. - The veterinary business faced continuous development pressure, leading to stagnant revenue since its IPO in 2015, which did not exceed 350 million yuan [2]. - In 2024, the company strategically adjusted its business layout by divesting loss-making veterinary assets and acquiring a 55% stake in Ruisheng Biological, focusing on high-tech dental restoration materials [2]. Group 2: Market Opportunity - Ruisheng Biological operates in a rapidly expanding market for dental implant restoration materials, benefiting from explosive demand and structural opportunities in China's dental healthcare market [3]. - Following the implementation of centralized procurement for dental implants in April 2023, the cost of a single dental implant dropped from tens of thousands to 4,000-6,000 yuan, stimulating demand [3]. - The dental implant market in China grew from approximately 27 billion yuan in 2022 to 38 billion yuan in 2023, with a projected growth to over 50 billion yuan in 2024 and 80 billion yuan by 2026 [3][4]. Group 3: Competitive Position - Ruisheng Biological has established a strong position in the domestic dental restoration materials market, with a market share that continues to rise and is accelerating the replacement of imported brands [5]. - The company’s bone repair products, made from bovine bone, and its collagen membranes have shown effective results in clinical applications, with a significant increase in sales volume [6]. - In 2023, Ruisheng Biological's bone powder sales grew by 138%, and in 2024, it is expected to continue growing by 61%, leading the market among domestic brands [6]. Group 4: Future Growth Potential - Ruisheng Biological is set to double its production capacity for bone powder from 800,000 bottles per year to 2 million bottles per year by 2025, with a 15% reduction in unit costs [6][7]. - The company is also expanding its collagen membrane production capacity and has achieved competitive pricing, winning bids in 95% of provinces under centralized procurement [7]. - Ruisheng Biological has committed to achieving a cumulative net profit of no less than 414 million yuan from 2024 to 2026, with 138 million yuan expected in 2024, indicating a feasible path to meet its performance commitments [7].