Daily Brief Health Care: Hangzhou Kangji Medical Instrument Co., Ltd., Cleanspace Holdings Ltd, Pharma Foods International, Fujian Haixi Pharmaceuticals, Puxiang Healthcare Holding and more

• On the 12th August, Hangzhou Kangji Medical (9997 HK) announced an Offer, by way of a Scheme, from a consortium led by TPG and Qatar Investment Authority, together with the founders.
• The HK$9.25/share consideration price (declared final), was an lacklustre 9.9% premium to last close. But pitched around a four-year high. 
• The Scheme Document is now out, with a Court Meeting on the 10th November and expected payment around the 16th December – in line with my expectations.

• Innovative Niche Player: CleanSpace is a designer and manufacturer of advanced Powered Air Purifying Respirators (PAPRs), distinguished by its patented, compact, and ergonomic all-in-one design that eliminates the need for cumbersome belt-and-hose units common among competitors.
• Financial Turnaround in Progress: The company is demonstrating a significant operational recovery, with strong revenue growth of 26% in FY25, expanding gross margins to nearly 75%, and achieving positive EBITDA and operating cash flow in the second half of FY25. It is on a trajectory to reach sustained breakeven.
• Strategic Growth Focus: Having pivoted from a pandemic-driven healthcare focus back to its core industrial market, CleanSpace is pursuing growth through geographic expansion in the US, Europe, and Asia, alongside new product launches and growing its recurring revenue from consumables, which now account for 47% of sales.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

• Recent gains wiped out as large advertising budget cuts operating and net profit, diverting attention from unique technology and long-term potential.  Gross margin steady at about 80%.
• M&A could add 50% to sales, but details won’t be available until a deal is made.  Sales of functional food ingredients, supplements, personal care products and textiles continue to rise.  
• Pharmaceuticals and agricultural bio-stimulants should make significant contributions to the company’s business in the next several years. Buy into current weakness for long-term growth.

• Fujian Haixi Pharmaceuticals has filed for HK IPO to raise up to HK$994M. The company plans to sell 11.5M H shares at HK$ 86.40 per share.
• The company intends to use IPO proceeds for R&D to advance the clinical pipeline, mainly innovative drug candidates, and enhancing commercialization capabilities and expanding market presence.
• Haixi Pharma has 15 NMPA-approved generic drugs, out of which 13 products have been commercialized.  Five generic drug candidates are expected to be approved for marketing by 2025 or 2026.

• Hospital operation is an asset-heavy industry with large balance of fixed assets and intangible assets. So, there is a situation of expense “front-loading” and profit “back-loading” in Puxiang.
• Puxiang’s single-digit net profit margin is unsatisfactory. Net profit CAGR is much lower than revenue CAGR. Considering VBP and DRGs/DIP, Puxiang’s future net profit performance is unsettling.
• Due to concerns on profitability and future growth outlook, we think valuation of Puxiang should be lower than Topchoice, Aier, Hygeia, Jinxin, but could be higher than China Resources Medical