IPO Observation: One-Pulse Healthcare's Founders Were Involved in Bribery, Subsidiaries Frequently Fined

　　Hospitals are overflowing with patients, while small and medium-sized hospitals lack image equipment, making it a difficult situation. This is where third-party imaging centers come into play. Recently, One-Pulse Healthcare Group Co., Ltd. (hereinafter referred to as One-Pulse) submitted an IPO application to the Hong Kong Stock Exchange, with Zhongtai Securities (600030) serving as the exclusive sponsor.

　　From its prospectus, despite being a leading player in the industry, One-Pulse has many questions surrounding it. The company's revenue is steadily increasing, but why are its founders quitting one after another? How will they maintain profitability under their asset-intensive model? How will the company improve its compliance?

　　Two Founders Were Involved in Bribery; IPO Applications Before Compliance Improvements

　　One-Pulse was established in October 2014, with its initial founders being Wang Shihe and Gu Junjun, who respectively held a 60% and 30% stake. However, the company's founders soon became embroiled in bribery cases.

　　Between 2008 and 2014, Wang Shihe served as the chairman of a medical device trading group and bribed local hospital management personnel to obtain cooperation opportunities worth hundreds of millions of yuan. The personnel were later found guilty of accepting bribes, while Wang Shihe only testified as a witness and was not prosecuted.

　　In 2017, a medical company and its vice general manager were found guilty of bribery for providing funds to three former medical staff members at two hospitals between 2011 and 2014, thereby assisting the company in obtaining cooperation opportunities. The bribe-giver during this period was Gu Junjun, who was not prosecuted as a witness only.

　　According to Hong Kong Exchange regulations, the exchange requires listed companies' directors to uphold their fiduciary duties. If there are incidents that raise serious questions about the integrity and reputation of a director, that person is deemed unfit to serve on the board. In past cases, there have been instances where IPO applicants were rejected by the exchange due to their directors and co-founders being involved in bribery.

　　Although Wang Shihe and Gu Junjun were not prosecuted, they conducted a series of share transfers before the IPO. As of the prospectus publication date, Wang Shihe's stake had dropped to 5.25%, while Gu Junjun's stake had also decreased to 5.25%.

　　It is estimated that Wang Shihe has cashed out over CNY3.5 billion through multiple share transfers, while Gu Junjun has cashed out over CNY1 billion.

　　Furthermore, in 2021, Wang Shihe resigned as the chairman of One-Pulse's board and CEO, while Gu Junjun resigned as a director and member of the supervisory board. Both individuals have relinquished their voting rights and pledged to abide by the agreement after the IPO, making them unable to revoke it.

　　Asset-Intensive Model Results in Equipment Costs Eating into Profits; 9-Year History of Break-Even Point

　　One-Pulse's operating model also makes its profitability difficult. The company's main business includes imaging center services, imaging empowerment solutions, and One-Pulse cloud services, with imaging center services being the primary source of revenue.

　　As of December 2022, One-Pulse had a total of 86 imaging service centers, mainly providing medical imaging operations to hospitals and other healthcare institutions. This business model requires One-Pulse to rent properties, build factories, and purchase equipment.

　　According to data, the company's main raw materials and medical equipment costs account for 41.4%, 37.4%, and 48.8% of sales costs, respectively. High equipment fees have also put significant pressure on One-Pulse's profit margins.

　　Until the first half of 2023, One-Pulse only achieved a profit of CNY4729.2 million, which is its first time making a profit since its establishment nine years ago. In the previous three years, One-Pulse had accumulated losses of CNY6.53 billion.

　　As of December 2022, One-Pulse had a total of 86 imaging service centers. In the future, the company will increase its construction efforts for these centers, which means it will face long-term pressure from equipment, factory, and property depreciation.

　　Compliance Needs Improvement; Subsidiaries Frequently Fined

　　Due to the company's reliance on renting properties, it not only faces market fluctuations in rental income but also compliance issues.

　　According to its prospectus, One-Pulse has rented 54 properties in China, mainly for office use, imaging centers, and employee dormitories.

　　As of the last possible date for correction, the company had 52 unregistered lease agreements. One-Pulse stated that if relevant departments require the company to rectify the issue but fails to do so within the specified timeframe or is found guilty of violating the regulations, it will be fined between CNY1,000 and CNY10,000 per unregistered agreement.

　　Additionally, Qichacha data shows that One-Pulse's subsidiaries have been frequently fined. In 2022, Leping One-Pulse was fined for writing medical records irregularly and for not following radiation protection principles during medical imaging procedures. In May 2021, Beijing One-Pulse was fined for failing to report accident risks regularly. In March 2021, Xinyu One-Pulse was warned and fined for operating radiation diagnosis services beyond the scope of its permit.