Behind the IPO of Jianxin Superconductor is the brutal reality of low-price competition in magnetic resonance

The answer to whether the "2 million bidding for MRI equipment" is profitable is gradually emerging.

The IPO application of Ningbo Jianxin Superconducting Technology Co., Ltd. (hereinafter referred to as "Jianxin Superconducting"), a core component supplier for MRI, has been accepted on the Sci-Tech Innovation Board.

Jianxin Superconducting is a supplier of magnets for domestic MRI manufacturers, with clients including Fujifilm, GE Healthcare, and WDM (600055.SH), among other imaging medical leaders.

This prospectus details the cost data of superconducting magnets, which are core components of MRI.

In 2024, the average selling price of Jianxin Superconducting's superconducting products is 1.0744 million per unit, accounting for more than 50% of the 2 million per unit price of MRI products.

This means that, when combined with production, research and development, and other cost expenditures, the low-price competition for low-end MRI equipment is essentially "not profitable" for manufacturers.

Revealing Magnet Costs

Currently, MRIs are mainly categorized into 1.5T, 3.0T, and 5.0T standards, which are positively correlated with image quality.

In recent years, many equipment manufacturers have actively reduced prices for the relatively low-end 1.5T MRI equipment in local procurement to gain more market share.

In July 2021, Langrun Medical's 1.5T MRI was successfully bid at 2.93 million;

More than a year later, Kaipu Medical's 1.5T MRI was bid at only 2.6 million;

In April this year, WDM's 1.5T MRI was bid at 2 million, once again breaking the low-price bidding record for MRI equipment.

Behind the frequent low prices, the production costs of MRI may not be low.

The core components of MRI include magnets, gradient coils, etc., which account for about 50% of the cost.

Since MRI requires a high uniformity and stability in a strong magnetic field, the magnet is the most important component of MRI.

Magnets can be further divided into superconducting magnets and permanent magnets, each with its advantages.

Superconducting magnets are currently the only type of full-body imaging magnets that can achieve a magnetic field strength of 1.0T and above. The ultra-high magnetic field strength can magnetize hydrogen nuclei in human tissues, thereby achieving medical imaging goals.

In contrast, permanent magnets have relatively lower magnetic field strengths, generally used in 0.05-0.5T MRIs.

Most medical institutions use MRI models of 1.5T and above, so the commercial prospects for superconducting magnets are broader.

Currently, MRI manufacturers mainly obtain superconducting magnets through self-production and external procurement.

Siemens, Philips, and United Imaging Healthcare (688271.SH) all produce superconducting magnets in-house, while Neusoft Medical partially develops its own superconducting magnets;

WDM, Langrun Medical, GE Healthcare, and other manufacturers mainly purchase from third-party suppliers.

Jianxin Superconducting mainly focuses on superconducting products (collectively referred to as "superconducting magnets") and is a core supplier for many domestic MRI manufacturers.

From 2022 to 2024, superconducting magnets generated revenues of 182 million, 263 million, and 263 million, accounting for 50-60%.

During the same period, sales volumes were 181 units, 246 units, and 245 units, respectively.

Based on this, the average selling prices of superconducting magnets from 2022 to 2024 reached 1.0047 million per unit, 1.0687 million per unit, and 1.0744 million per unit, respectively. This means that in each MR device costing up to 2 million yuan, the cost of superconducting magnets alone accounts for more than 50%.

Although priced at a million, the business of Jianxin Superconducting is not "highly profitable."

From 2022 to 2024, the costs of superconducting magnets for Jianxin Superconducting were 810,700 yuan/unit, 811,700 yuan/unit, and 804,800 yuan/unit, with gross profit margins of 19.31%, 24.05%, and 25.09%, significantly lower than those of terminal manufacturers.

In 2024, the gross profit margins of United Imaging Healthcare and WDM reached 48.54% and 36.55%, respectively, exceeding Jianxin Superconducting by 23.45 percentage points and 11.46 percentage points.

This indicates that even if MR equipment manufacturers adopt self-production, the cost of superconducting magnets will still reach hundreds of thousands.

This data reflects the harsh reality of centralized procurement for MR equipment in China: the cost pressure from low-price competition in the 1.5T MR field is enormous, and there is even a risk of loss-making bids.

However, terminal manufacturers may not be willing to bear this pressure independently.

If the price war continues, terminal manufacturers may also demand Jianxin Superconducting to lower prices, which could further compress its profit margins.

"If a bulk procurement policy is fully implemented in the medical equipment field in the future, it will affect the sales prices of downstream MR equipment manufacturers, and the pressure to lower prices may be transmitted to upstream core components," Jianxin Superconducting acknowledged.

Jianxin Superconducting has adopted a sales strategy of "exchanging volume for price."

"The future market has considerable expansion space, and the business strategy is to achieve more profits through sales volume and revenue growth while maintaining reasonable gross profit," Jianxin Superconducting stated.

Investment in Production Capacity Needs to be Tested

Jianxin Superconducting currently offers products including 1.5T zero-evaporation superconducting magnets, 1.5T helium-free superconducting magnets, and 3.0T zero-evaporation superconducting magnets, making it the world's leading independent supplier of superconducting magnets in the MR industry.

Many domestic manufacturers approved for MR equipment have Jianxin Superconducting's name associated with them.

In 2022, WDM obtained the registration certificate for the first domestically produced helium-free MRI device, which utilized Jianxin Superconducting's 1.5T large-aperture helium-free superconducting magnet;

In 2023 and 2024, Langrun Medical and WDM's 3.0T MRI devices were approved one after another, with the zero-evaporation superconducting magnets also sourced from Jianxin Superconducting.

In 2024, Fujifilm and WDM contributed 182 million yuan and 63 million yuan to Jianxin Superconducting, ranking as the top two major customers.

Jianxin Superconducting has also entered the supply chain of GE Healthcare, a leading international medical device company.

In 2024, GE Healthcare purchased 34 million yuan worth of superconducting magnets from Jianxin Superconducting.

GE Healthcare itself possesses the core technology for self-producing superconducting magnets but has outsourced this business to Jianxin Superconducting, possibly due to cost, domestic production of core components, and localization trends.

The two parties have also formed a binding equity relationship.

In March 2023, GE Healthcare's subsidiary, GE Healthcare Venture Capital (Hangzhou) Co., Ltd. (collectively referred to as "GE Healthcare"), subscribed to 3.9 million yuan of registered capital in Jianxin Superconducting for 4.7 million yuan, holding a 3.1% stake GE Healthcare and the actual controller of Jianxin Superconducting, Xu Jianyi, and others have agreed that if Jianxin Superconducting is no longer a supplier of GE, they have the right to request the latter to repurchase shares.

This betting agreement will automatically terminate from the date Jianxin Superconducting submits its IPO application, but if its IPO fails, it will regain effectiveness.

Being able to successively enter the supplier lists of leading manufacturers such as Fujifilm and GE Healthcare is one of the reasons why Jianxin Superconducting can still "break through" despite the slowdown in the IPO rhythm.

Since May of this year, the Shanghai Stock Exchange has only accepted the IPO application of Jianxin Superconducting, while the Shenzhen Stock Exchange has not had any new IPO acceptance projects during the same period.

In comparison to the situation where the number of IPO acceptance projects at the Shanghai and Shenzhen Stock Exchanges is 0 in May 2024, this is still a significant breakthrough.

However, in 2024, Jianxin Superconducting's revenue was only 425 million yuan, a year-on-year decline of 5.58%.

This is also affected by the broader environment.

The details of the equipment trade-in program will only be implemented in July 2024, leading to a slowdown in the procurement rhythm of medical institutions that year, and many MR companies are expected to perform poorly in 2024.

With the recovery of the procurement rhythm in 2025, Jianxin Superconducting's performance is expected to see significant growth—this January, the scale of medical equipment procurement reached 16.9 billion yuan, a year-on-year increase of 40%.

Jianxin Superconducting has made substantial preparations for this, with the book value of inventory reaching 319 million yuan by the end of 2024.

In this IPO, Jianxin Superconducting plans to raise 865 million yuan, which will be invested in projects such as "annual production of 600 sets of helium-free superconducting magnets" and "annual production of 600 sets of high-field medical superconducting magnet technical upgrades."

However, Jianxin Superconducting's sales volume of helium-free superconducting magnets in 2024 was only 38 units, less than 10% of the aforementioned fundraising production capacity.

Regarding the rationality of the fundraising investment, Jianxin Superconducting explained that the growth of the superconducting magnet market size and supplying GE Healthcare can ensure the digestion of the new production capacity.