Premium 24x related acquisition? Five questions about Shapuaisi

Image source: Interface News reporter’s on-site shooting

Shapuaisi (603168.SH) recently announced a significant related party transaction, intending to acquire 100% equity of Shanghai Qingli Industrial Co., Ltd., controlled by the company’s actual controller, the Lin brothers, for a cash amount of 528 million yuan, thereby indirectly holding its core asset - Shanghai Tianlun Hospital. This transaction has quickly drawn high attention from the market and regulators due to the staggering 2417.87% appraisal appreciation rate and the suspicion of “blood transfusion” to the controlling shareholder.

This marks the third high-premium acquisition of related party assets since Shapuaisi went public.

In 2020, Shapuaisi acquired Taizhou Women and Children’s Hospital at a premium of 278.88%; in 2023, the listed company acquired Qingdao Shikang Eye Hospital at a premium of 299.51%. Both hospitals are assets actually controlled by the Lin brothers and their relatives. Both transactions included performance commitments, which were not fulfilled.

There are five major mysteries surrounding this hospital acquisition: Is the exorbitant premium reasonable? Are there hidden benefits being transferred? Can the performance commitments be fulfilled? Can the cash payment be sustained? What is the potential risk of cross-industry integration?

In response to these questions, Interface News reporters recently visited Shanghai Tianlun Hospital to try to get to the bottom of it.

Multiple high-premium related acquisitions have “stalled”

Shapuaisi was formerly known as Pinghu Pharmaceutical Factory and was listed on the A-share market in July 2014. With its eye drops for “cataract treatment,” Shapuaisi’s revenue surged after going public. From 2015 to 2017, the annual revenue exceeded 900 million yuan. At the end of 2017, the advertised “cataract prevention and treatment efficacy” of Shapuaisi eye drops came under scrutiny from medical influencers like “Dingxiang Doctor” and several ophthalmologists, leading to a decline in the company’s performance.

From the end of 2018 to early 2020, the original controlling shareholder and actual controller Chen Dekang gradually cashed out, and the incoming Lin brothers were viewed as a new generation of the “Putian system,” with their father being Lin Chunguang, a representative businessman of the “Putian system,” whose assets include Shanghai New Vision Eye Hospital.

The change of actual controller in 2019 marked a watershed moment; although Shapuaisi’s performance had started to decline, its financial indicators were still good, with a debt-to-asset ratio as low as 6.3%, and there were no short-term or long-term borrowings, with a gross profit margin consistently above 66%.

After the Lin brothers took control of Shapuaisi, they mainly engaged in capital operations on the listed company platform under the banner of “synergy” and “extending the chain.” In September 2020, the company announced a cash purchase of Taizhou Women and Children’s Hospital at a premium of 278.88% for 502 million yuan; in January 2023, the company announced another acquisition of related assets, purchasing 100% of Qingdao Shikang Eye Hospital at a premium of 299.51 million yuan, with Lin Changjian, the cousin of the Lin brothers, holding 20% equity in the target company through Shanghai Fangzhi, constituting a related party transaction.

Not only were the performance commitments unfulfilled, but Taizhou Women and Children’s Hospital also seriously changed its performance after the commitment period ended, with a net profit of 28.68 million yuan and 8.19 million yuan from 2023 to 2024.

Shapuaisi’s related transaction situation. Illustration: Interface News Chen Huidong

Shapuaisi’s original business has also continued to weaken. The 2024 financial report shows that the sales volume of its once “miracle drug” benzalkonium chloride eye drops fell by 33.84% year-on-year, the sales volume of large-volume injections fell by 18.63% year-on-year, and the sales volume of cefaclor fell by 55.28% year-on-year.

Shapuaisi’s performance after changing control. Image source: Wind

In 2024, the company reported a net loss of 123 million yuan, which further increased in 2025. According to the announcement, Shapuaisi expects a pre-loss of 213 million to 319 million yuan last year, mainly due to the goodwill impairment provision related to the acquisition of the two hospitals.

At the same time, the company’s financial pressure is also increasing. By the end of 2022, the company’s debt-to-asset ratio was 12.31%, with a cash balance of 525 million yuan and current liabilities totaling 206 million yuan due within one year. By the end of the third quarter of 2025, the debt-to-asset ratio rose to 24.08%, with cash balance falling to 101 million yuan, and total current liabilities reaching 361 million yuan, increasing debt repayment pressure.

The “virtual and real” aspects of the 2417% premium hospital asset

The core basis for the pricing of this transaction is the appraisal report issued by Wanlong (Shanghai) Asset Appraisal Co., Ltd. The report employed both the asset-based method and the income method for evaluation. The asset-based method yielded a total equity valuation of 22.8287 million yuan, with an appreciation of only 8.86%. However, the transaction parties ultimately chose the income method’s valuation conclusion of 528 million yuan, resulting in a soaring appreciation rate of 2417.87%.

Shapuaisi explained in its announcement that the income method better reflects the company’s “operating ability” and “value of intangible resources,” including customer resources, brand advantages, etc.

Financial information of Shanghai Qingli (main asset: Shanghai Tianlun Hospital). Image source: Announcement

It can be seen that from 2024 to 2025, Shanghai Qingli’s net asset balance was 29.3305 million yuan and 20.9701 million yuan, respectively. Why did the hospital’s net asset scale shrink so rapidly in just one year? Interface News made several attempts to contact Shapuaisi regarding this, but had not received a response by the time of publication.

However, for the shrinking net asset scale of Shanghai Tianlun Hospital, the appraisal report provided an overly optimistic forecast of future revenue and profit: projecting operating revenue to steadily grow from 173 million yuan in 2026 to 238 million yuan in 2031, with a compound annual growth rate of 6.68%; expected net profit to grow from 32.44 million yuan in 2026 to 56.3416 million yuan in 2031.

The basis for supporting this high growth expectation is summarized in the announcement as several factors: the “aging population dividend,” the continually improving utilization rate of geriatric rehabilitation ward beds, and the development of high-value-added services such as orthodontics.

According to Interface News’s on-site investigation on March 19 at Shanghai Tianlun Hospital, the hospital is situated at the intersection of Liangcheng Road and the Outer Ring Road in the northern part of Hongkou District, Shanghai. Hongkou District is one of the areas with the highest aging rates in the city, with fierce competition among private hospitals, with over ten private hospitals, including Shanghai Tai’an Hospital, Shanghai Quyang Hospital, and Shanghai Haijiang Geriatric Hospital, clustered in this area, focusing on traditional Chinese medicine, rehabilitation, and other elderly-related departments.

Shanghai Tianlun Hospital is positioned similarly to a “community hospital.” Interface News reporters saw the hospital’s business license and medical institution practice license (general hospital) on the first floor, with the medical institution practice license valid from June 5, 2024, to November 6, 2028.

The main building of the hospital has four floors, with traditional Chinese medicine, dentistry, rehabilitation inpatient, and gynecology (infertility) being the main departments of Shanghai Tianlun Hospital. During regular business hours that afternoon, the foot traffic in the outpatient departments was not high, and there were few people in the waiting area.

The lobby of Shanghai Tianlun Hospital. Interface News reporter’s on-site shooting

The third and fourth floors of the hospital are rehabilitation inpatient wards, primarily housing patients with chronic middle-aged and elderly diseases and orthopedic diseases, with almost no empty beds. In terms of costs, including room fees, nursing fees, examinations, rehabilitation treatments, and meals, patients in 3-4 person rooms incur monthly costs of six to seven thousand yuan, while patients in two-person rooms incur monthly costs of eight to nine thousand yuan.

In the rehabilitation inpatient ward, many patients reside here long-term. “My mother moved in here after the renovation last year; she has been here for almost a year,” a patient’s family member told Interface News. “Public hospitals have time limitations for hospitalization, and my mother is over 90 years old and has limited mobility after a fracture. Staying in a private hospital is more convenient and easier to ‘manage,’ and medical insurance can reimburse 90%.”

Based on the on-site investigation of Shanghai Tianlun Hospital, Interface News identified the following doubts that need clarification:

Doubt 1: Is the actual bed occupancy rate difficult to reach the forecast values?

Income from rehabilitation wards is the revenue pillar of Shanghai Tianlun Hospital, accounting for over 30%. During the forecast period, the rehabilitation ward is the only department in the hospital where revenue proportion is expected to increase.

According to Shapuaisi’s announcement, the bed occupancy rate in the geriatric rehabilitation ward is projected to rise from 87.20% in 2025 to 96.83% in 2031.

Forecasted revenue proportions of various departments during the target period. Image source: Announcement

However, based on Interface News’s on-site investigation, the highest occupancy rates in the hospital’s third and fourth floors are in the 3-4 person and 2-person rooms, with almost no empty beds. The second floor does have a large room for seven patients with available beds, but most elderly patients are hospitalized for health maintenance. Many patients who spoke with reporters have been residents for over a year, and due to the high local medical insurance reimbursement rate, they would not choose the less comfortable multi-bed rooms.

Given the hospital’s location, the overall difficulty of expanding the hospital is significant. Moreover, several patients told Interface News that the rehabilitation inpatient department just completed renovations in 2025 and will not undergo further expansions or renovations in the short term. This suggests that the projected increase in bed occupancy rates in the rehabilitation ward, nearing 10%, is overly optimistic.

Additionally, considering that the hospital operates in a highly competitive market for social medicine, with many nearby medical institutions offering elderly-related services, competition is fierce.

Doubt 2: Is there a discrepancy in the forecasted income from the rehabilitation ward?

According to Shapuaisi’s announcement, Shanghai Tianlun Hospital has a total of 213 geriatric rehabilitation beds in 2025.

Interface News found that the hospital’s inpatient wards are primarily located on the second to fourth floors, with the second floor mostly containing large rooms for seven patients. The rehabilitation inpatient department on the third and fourth floors has approximately 154 beds in total, including five or six two-person rooms. Based on the “Tianlun Hospital Admission Self-Payment Notice (Third Floor)” and communications with doctors, the cost per bed in the 3-4 person rooms is approximately 4800 yuan/month, while the cost per bed in the two-person rooms is around 6600 yuan/month. Additionally, doctors indicated that the average monthly payment for examinations, rehabilitation, and medication for each inpatient patient is approximately two to three thousand yuan. Based on this estimation, the revenue from the rehabilitation inpatient department on the third and fourth floors could reach around 20 million yuan if all beds were occupied every day throughout the year.

However, Shapuaisi’s performance forecast for the hospital indicates that the hospital’s rehabilitation bed inpatient revenue will reach 38.6943 million yuan in 2025, and this figure is expected to reach 43.1792 million yuan in 2026.

Predicted situation of bed occupancy rate for geriatric rehabilitation wards. Image source: Announcement

Doubt 3: Can the gross profit margin continue to rise?

According to Shapuaisi’s forecasts, the hospital’s gross profit margin will rise from 36.19% in 2025 to 41.15% in 2031.

However, Interface News noted that as a designated medical insurance unit in Shanghai, the hospital has been penalized multiple times in recent years for violating medical insurance regulations, such as repeated prescriptions and excessive examinations. This indicates that regulators are accelerating efforts to close the hospital’s non-compliant “revenue” channels, and the intensity of regulation will become stricter as the hospital enters the listed company system.

An administrative penalty case issued by the Hongkou District Medical Security Bureau on November 24, 2025, indicates that Shanghai Tianlun Hospital has engaged in practices such as including medical expenses not covered by the medical security fund in the settlement of the medical security fund, repeated prescriptions, providing unnecessary medical services, excessive examinations, itemized project charging, charging above standard, and duplicate charging.

Shanghai Tianlun Hospital penalty announcement. Image source: Shanghai Hongkou District People’s Government website

Moreover, according to Tianyancha, in February 2025, December 2024, and January 2024, Shanghai Tianlun Hospital was also penalized by the Hongkou District Medical Security Bureau for “providing unnecessary medical services,” “duplicate charges, excessive payments, excessive examinations, and excessive medical practices.”

From the perspective of the listed company’s capital operations and business layout, the doubts surrounding this acquisition extend beyond these.

Doubt 4: Precise cash flow direction and benefits transfer channels.

Compared to the previous acquisition of Qingdao Shikang Eye Hospital, Shapuaisi’s payment plan for this acquisition is more “aggressive,” rapidly completing the “blood transfusion” from the listed company to the actual controller.

When acquiring Qingdao Shikang Eye Hospital, Shapuaisi paid only 20% of the total transfer payment within 10 working days after the equity transfer agreement took effect, with the second installment of 50% to be paid within 10 working days following the equity transfer date. The remaining three installments would depend on the target’s performance each year.

In this transaction, the total payment is 528 million yuan. According to the agreement, the first payment of 30% (158.4 million yuan) is to be paid within 20 working days after the agreement takes effect; the second payment of 40% (211.2 million yuan) is to be paid within 10 working days after the completion of the equity industrial and commercial change. This means that shortly after the transaction is completed, the actual controller can receive a total of 70%, amounting to 369.6 million yuan in cash.

The remaining 30% of the price (10% each in three installments) is tied to performance commitments from 2026 to 2028. This arrangement front-loads most of the transaction price, significantly reducing the seller’s repayment risk. Even if the subsequent three years’ performance does not meet expectations, the seller must compensate, but the substantial cash already received is secured. If the target fails to meet performance commitments, the performance compensation clause stipulates a “compensation cap equal to 100% of the equity transfer payment already made by Party A.”

Shapuaisi itself does not have abundant funds. According to the third-quarter report for 2025, the company’s ending cash balance was approximately 101 million yuan, with trading financial assets of approximately 122 million yuan, totaling 223 million yuan, which is insufficient to cover the 528 million yuan transaction price.

This “pay first, then bet” structure raises the question of whether it effectively transfers all transaction risks to the listed company and whether it constitutes a “zero-risk cash-out” mechanism for minority shareholders. Interface News’s interview outline included these questions but received no response.

Additionally, there are matters regarding the leasing of properties to the actual controller, Lin Chunguang, by Shanghai Tianlun Hospital. A researcher from the listed company indicated to Interface News that leasing real estate to the listed company is a commonly used and low-risk means of benefits transfer by controlling shareholders.

The leasing issues and others were also mentioned in the inquiry letters from the exchange.

Doubt 5: Integration challenges under the “drug + medical” strategy

Shapuaisi primarily focuses on ophthalmic drugs, with its core product being benzalkonium chloride eye drops. In recent years, it has entered the medical services sector through acquisitions, proposing a “drug + medical” dual-driven strategy.

From the acquisition of Taizhou Women and Children’s Hospital (specializing in obstetrics and gynecology) to Qingdao Shikang Eye Hospital (specializing in ophthalmology), and now to Shanghai Tianlun Hospital (a comprehensive geriatric hospital), the company’s medical service asset layout spans multiple sub-sectors, with synergies yet to be realized, and the medical layout path appears somewhat fragmented.

The premium rates for the first two related acquisitions were within 300%, but ultimately both failed to meet performance commitments, and Taizhou Women and Children’s Hospital even experienced a performance reversal after the commitment expired. The premium rate for the current acquisition of Shanghai Tianlun Hospital is as high as 2417.87%, occurring in the context of the main business “bleeding” and urgently needing new growth points.

The more realistic operational risk lies in goodwill. This acquisition could generate nearly 500 million yuan in massive goodwill. As of the third-quarter report for 2025, Shapuaisi’s book goodwill has reached as high as 365 million yuan. If Shanghai Tianlun Hospital’s future operating performance falls short of expectations, especially if it cannot achieve the overly optimistic profit forecasts in the appraisal report, it will continue to trigger significant goodwill impairment, affecting the listed company’s current profits.

Will the regulatory inquiry letter prevent this rapid “blood transfusion” to the actual controller? If not, this former ophthalmic giant may be laying another difficult-to-dismantle “landmine” amid aggressive related-party acquisitions.