Shapuai Si plans to acquire hospitals affiliated with related parties at a 24x premium, raising doubts. The China Securities Investment Consulting Center questions several key issues.

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Recently, a related-party acquisition with a premium as high as 24 times has pushed Shap Aices (SH603168) onto the front page.

On March 24, Shap Aices announced that earlier, on March 17 this year, it had received from the Shanghai Stock Exchange a letter of inquiry regarding the company’s purchase of assets from a related party. As of the date of this announcement, the company and its intermediaries still need to further verify and improve the response content. Therefore, the company will postpone its response to the inquiry letter by no more than 5 trading days.

On the same day, Shap Aices also disclosed that it received a “Shareholder Proposal Letter” from the Center for Small and Medium Investors Services (hereinafter referred to as the “Center for SME Investor Services”). The Center for SME Investor Services stated that there are still questions about the reasons for the target company’s significant growth in operating performance over the past two years, as well as the reasonableness of the valuation for this transaction. It is now exercising its shareholder proposal right in accordance with the law.

On March 17, Shap Aices announced that it plans to acquire 100% of the equity of Shanghai Qinli Industrial Co., Ltd. (hereinafter referred to as “Shanghai Qinli”), held by the company’s controlling shareholder and its persons acting in concert, by paying 528 million yuan in cash. Notably, the carrying book value of the net assets of the target asset Shanghai Qinli is 20.9746 million yuan, while the valuation under the income approach reaches 528 million yuan, implying an appreciation rate as high as 2417.87%.

Shanghai Qinli’s core assets are Shanghai Tielun Hospital Co., Ltd. (hereinafter referred to as “Tielun Hospital”). In the merger and acquisition announcement, Shap Aices treated the acquisition of this hospital as an important move to advance a “pharma + medicine” dual-wheel strategy, open up a blue ocean in the silver economy, and quickly enter key markets.

In its letter, the Center for SME Investor Services raised questions about this transaction and pointed to several major doubts:

First, the growth in Shanghai Qinli’s performance looks “extraordinary.” The announcement shows that Shanghai Qinli was established in 2022. Its core asset is 100% equity of Tielun Hospital. In recent years, net profit has shown substantial growth, rising from 2.02M yuan in 2023 to 27.14M yuan in 2025, with an average annual compound growth rate of as high as 266.92%.

The Center for SME Investor Services noted that, based on information such as announcements from comparable listed companies in the same industry, the Shanghai No. 1 People’s Hospital, a well-known Grade III top public hospital located in Hongkou District, Shanghai and within 6 kilometers of Tielun Hospital, saw its 2024 diagnostic and treatment revenue grow year over year by 9.97%. Among private healthcare institutions, the listed company Nanjing Xinbai (rights protection) (SH600682) and Honghe Ren’ai Medical (HK03869) saw their 2024 medical services business revenue grow year over year by 8.84% and 1.02%, respectively—both far lower than the revenue growth rates of Tielun Hospital in 2024 and 2025 (30% and 18%, respectively). Based on this, the Center for SME Investor Services suggested that Shap Aices provide additional explanations regarding the reasons for the target company’s significant performance growth before the acquisition.

The Center for SME Investor Services also questioned whether this high-premium acquisition is conducive to protecting the interests of the listed company and its minority shareholders. Shap Aices itself faces pressure on operating performance. In 2024, its net profit attributable to shareholders was a loss of 123 million yuan; in 2025, it is expected to lose between 228 million yuan and 342 million yuan, with the loss scale continuing to grow. As of the end of the third quarter of 2025, the company’s combined cash and cash equivalents and trading financial assets are about 223 million yuan, which is insufficient to cover the 528 million yuan transaction consideration. This implies that the company would need to incur debt to complete the acquisition, which may adversely affect the company’s liquidity, debt-servicing capacity, and subsequent operations—harmful to protecting the interests of the company and its minority shareholders. The Center for SME Investor Services also mentioned that the two hospitals previously acquired by Shap Aices experienced performance declines after the performance commitment period expired, which undoubtedly increases market concerns about this acquisition.

In the “Shareholder Proposal Letter,” the Center for SME Investor Services also focused on questioning the profitability forecast for the rehabilitation ward revenue of Shanghai Qinli and recommended that Shap Aices carefully consider the transaction pricing of the target company.

First, the Center for SME Investor Services pointed out that the number of beds used in the earnings forecast is inconsistent with the number of approved beds disclosed on the official website of Tielun Hospital. The forecast trend of changes in operating costs in this transaction does not match the bed expansion data shown in the valuation results. According to the announcement for this transaction, the target company’s number of beds for 2025 is 213. The forecast maintains the target company’s bed count for 2026 to 2031 at 213. However, both the valuation report and the official website of Tielun Hospital disclose that Tielun Hospital’s current approved bed count is 95, which is less than half of the forecast value. There are inconsistencies in the disclosures from different channels.

Second, on bed utilization rates, the assessment forecast data for Shap Aices also appears overly optimistic. According to the assessment forecast for this transaction, the target company’s bed utilization rate for 2026 to 2031 is expected to rise steadily from 90.31% to 96.83%. This projected value is not only far higher than the industry average level of private hospitals in Shanghai, but also runs counter to regional trends.

The reporter from the “Economic Daily News” previously also conducted an on-site visit to Tielun Hospital. The hospital is located in Hongkou District, Shanghai, and the surrounding area is mainly composed of older residential communities. At the site, the reporter saw that most of the patients coming to receive treatment were local middle-aged and elderly residents nearby. Based on observations on site, Tielun Hospital’s positioning is similar to a community-level basic hospital. The third and fourth floors mainly treat elderly patients who have difficulty with mobility and cannot manage daily living independently. A nursing attendant said, “The bed utilization rate is still quite high—basically everything is fully booked.”

In addition, the forecast growth rate of the average daily cost per bed for Tielun Hospital, which is under the target company, is also puzzling. The assessment forecast states that from 2026 to 2031, the target company’s average daily cost per bed will increase from 615 yuan to 882.75 yuan, with an average annual compound growth rate of 7.5%. As a reference, from 2019 to 2023, the average annual compound growth rate of average per-episode medical and pharmaceutical costs for hospitalized patients in general hospitals was only 0.84%. Within a 2-kilometer radius of Tielun Hospital, the average daily cost per bed publicly disclosed by Shanghai Lixiang Nursing Home, a private elderly-care and nursing institution, is 217 yuan to 534 yuan per day—also far below the costs of Tielun Hospital.

In summary, the Center for SME Investor Services suggests that Shap Aices prudently assess the rationality of the target company’s future revenue forecasts, reconsider the valuation and consideration for this transaction, and protect the legitimate rights and interests of the listed company and minority shareholders.

Cover image source: Economic Daily News

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