24x Premium Acquisition of Related Assets: Shanghai Stock Exchange Questions the Reasonableness of the Shapuaisi Transaction

延期，再次延期， the market is still waiting for Sapropess (603168.SH) to respond to the inquiry letter from the Shanghai Stock Exchange.

Recently, a related-party acquisition matter involving a significant premium by this leading company in ophthalmic medications for cataracts has drawn heightened attention from the market. According to the company’s announcement, it plans to purchase, for RMB 528 million in cash, 100% of the equity interests in Shanghai Qinglei Industrial Co., Ltd. (hereinafter “Shanghai Qinglei”) held by the controlling shareholder and its parties acting in concert. The target asset’s book net assets are only about RMB 20.97 million, with an assessed appreciation rate as high as 2417.87%. On the day the announcement was released, the Shanghai Stock Exchange quickly issued an inquiry letter, directly targeting key questions such as the fairness of the valuation, the reasonableness of the related-party transaction, and the logic supporting performance.

Soon after, the China Securities Investor Service Center (hereinafter “CITIC Investor Service Center”) issued a recommendation letter as a shareholder, exercising the shareholders’ right to make recommendations in accordance with the law. It recommended that Sapropess carefully assess the reasonableness of the target company’s future revenue forecasts, reconsider the valuation and consideration for this transaction, and protect the interests of the listed company and the lawful rights and interests of small and medium shareholders.

The latest announcement shows that, as of April 1, Sapropess and intermediary agencies still need to further verify and improve the content of the response. After applying to the Shanghai Stock Exchange, the company will again delay its response to the inquiry letter, with the extension not exceeding five trading days.

Public information shows that the target company Shanghai Qinglei that Sapropess is acquiring was established in 2022. Its core assets are 100% equity interests in Shanghai Tianlun Hospital Co., Ltd. (hereinafter “Tianlun Hospital”). If this transaction is completed, Sapropess will indirectly hold 100% equity interests in Tianlun Hospital.

Whether the target assets can support a highly valued, high-growth expectation is a key focus jointly observed by the market and regulators. The announcement states that this transaction uses the income approach for valuation. The assessed value of the target company’s 100% equity interests is RMB 528 million, representing appreciation of 2417.87% compared with its consolidated basis book value of shareholders’ total equity of RMB 20.9701 million. The target company is expected to achieve revenue of RMB 157 million and net profit of RMB 27 million for fiscal year 2025. The transaction corresponds to a static P/E ratio of approximately 19.45x.

The Shanghai Stock Exchange’s inquiry penetrates layer by layer around the valuation issue, requiring Sapropess to fully explain the reasonableness of the 24x high premium by combining factors such as the target asset’s core competitiveness, its ability to generate sustainable earnings, and future growth potential, and whether there is any situation of transferring benefits to related parties. It also requires that, based on the target company’s historical operating data, industry policy, regional competitive landscape, and bed occupancy rate, Sapropess provide detailed explanations regarding the basis for determining key parameters in the income approach valuation—such as revenue, net profit, discount rates, and so on.

The CITIC Investor Service Center, meanwhile, focuses particularly on the target company’s profit forecast for revenue from rehabilitation wards, directly pointing to multiple data inconsistencies: the number of beds used in the profit forecast is inconsistent with the approved bed count disclosed on Tianlun Hospital’s official website. The projected trend for changes in operating costs in this case does not match the bed-expansion data shown in the appraisal results. The bed usage rate assumed in the profit forecast is far higher than the average bed occupancy rate of private hospitals in the country and in Shanghai.

This transaction includes performance commitments. The transaction counterpart commits that the target company will achieve net profits of not less than RMB 32.40 million, RMB 37.30 million, and RMB 42.65 million for 2026, 2027, and 2028, respectively. The cumulative net profit commitment for the three years is not less than RMB 112.35 million. Past performance shows that Shanghai Qinglei’s net profit levels in recent years have a clear gap compared with the committed amounts. Its net profits for 2024 and 2025 were RMB 18.98 million and RMB 27.13 million, respectively. Whether it can achieve a continuous three-year period of high growth in line with the commitments is what the market expects Sapropess to further explain.

The Shanghai Stock Exchange requires Sapropess to provide a detailed explanation of the feasibility of the performance commitments. It asks for disclosure of the target hospital’s department and department structure, charging standards, proportion of reimbursed payment from medical insurance, and stability of the core physician team, among other items. It also requires an argument for the supporting conditions for future revenue and profit growth, and a full disclosure of the potential impact on the listed company if performance commitments cannot be met.

According to the transaction agreement, the consideration for this transaction is RMB 528 million, to be paid using own funds and bank loans. The transaction payment will be made in five installments, with the combined proportion of the first two installments being approximately RMB 370 million. In contrast, Sapropess’ financial fundamentals put pressure on available capital. As of the end of the third quarter of 2025, the company’s cash and cash equivalents are about RMB 101 million, and trading financial assets are about RMB 122 million, totaling about RMB 223 million, which is insufficient to cover the transaction consideration. In 2024, the company’s net profit attributable to shareholders was negative RMB 123 million. In 2025, it is expected to incur losses ranging from RMB 228 million to RMB 342 million, with the magnitude of losses continuing to grow.

If the controlling shareholder’s assets are acquired at a high premium by taking on debt, whether it would have an adverse impact on the company’s liquidity, debt repayment capacity, and subsequent operations is a concern commonly raised by investors. The Shanghai Stock Exchange’s inquiry letter also centers on this realistic risk, requiring Sapropess to disclose in detail the specific plan for raising the RMB 528 million acquisition funds, and to disclose the progress of related financing arrangements. It also requires an assessment of the potential impact of a large cash outflow on the company’s day-to-day operations, its ability to repay debt, and its financial stability.

In addition, the Shanghai Stock Exchange also requires an explanation of whether relevant medical qualifications, practice licenses, and medical insurance designated-entity qualifications for Shanghai Tianlun Hospital are complete and valid, and whether there are any administrative penalties or compliance risks, and so on.