China's stock market boom instruments listed companies "innocent"

2015-05-25 12:00

At present, the entire Chinese stock market is skyrocketing, in the face of reaching more than 100 times the price-earnings ratio, the ceos of listed companies said that they could not stand it, and in this high-speed bubble state, listed companies in the instrument showed a huge crisis.

At a public meeting just ended, an instrument industry boss expressed his concern: "Now the stock market index is rising very fast, and concentrated in some industries is faster, has reached an unimaginable point, including our instrument industry." At the same time, the audience nodded and showed their approval, and the atmosphere of the whole venue suddenly ceased to be warm before and became serious, and even the air seemed to condense a little.

The boss is not being alarmist.

The foam on your face

Today, it is the last wave of economic crisis has not yet passed, the entire machinery industry has been deeply damaged, has not yet recovered, instrumentation industry due to its product dispersion, wide audience and many other reasons, not like construction machinery, heavy machinery and other industries as big damage, but this is only relative, the actual situation is still not optimistic. Now, however, another "crisis" has hit. Slightly different from the last time, this time is not for the machinery industry itself, but due to the crazy rise of the entire Chinese stock market at present, the impact of listed instrument companies.

In short, a publicly traded instrumentation company -- innocent.

For such a situation, another listed company boss summed it up very appropriately: "Now this high-speed bubble state, directly related to our instrumentation industry, this time the crisis, is directly against our industry."

According to the on-site ceos revealed that today's listed companies in the industry, if it is to do instruments, then the price-earnings ratio can reach more than 100 times, if deliberately get a concept out, such as the current hot environmental protection, health, health and other related, or directly into medical devices, the price-earnings ratio can reach more frightening 150 times. Regardless of how accurate the data are, there is no doubt about the trend for now. Even the ceos of many listed companies themselves can't believe that the price-to-earnings ratio is so high: "I can't make this much money in several lifetimes!"

The reasons for this situation are very complex, there are factors with the rising tide of the stock market, there are deliberate speculation, in short, the right place and people, listed companies in the instrumentation industry, seemingly ushered in their own "spring".

But what is the reality? I believe that many people have their own answers, after all, the bosses are worried from the heart. People who have studied the industry know that the basic characteristics of China's instrumentation industry is that the number of enterprises is large and small. To explain specifically, the annual sales revenue is concentrated in about 100 million yuan: "50 million to 100 million yuan, 100 million to 500 million yuan is very good, and when it reaches more than 500 million yuan, it will basically sweep." In this case, combined with the status quo, the question of the boss is very critical: "Now in this state, how much performance does the enterprise need to support it?" Or, more generally, how can I make so much money?"

For the current industry, this can almost be regarded as a "no solution" problem. After all, the existing experience and lessons prove that blindly expanding the scale of production is absolutely wrong, and improving the level of product science and technology. It is also clear that this can not be done overnight. From a longer term perspective, instrumentation as a member of the equipment manufacturing industry, as a solid industry, is definitely a need for sustainable development and continuous accumulation of the industry, in such an industry suddenly appeared today's situation, which has produced no small contradiction, will undoubtedly cast a shadow on the development of the entire industry.

What's more, the entire instrumentation industry is also facing such problems.

Volatile environment

One of them, compared with foreign companies, is small in scale.

For example, according to the 2014 development report provided by the scientific instrument industry, a branch of the instrumentation industry, foreign listed instrument companies are dozens of times or even hundreds of times larger than domestic enterprises only in terms of scale: Thermo Fisher's 2014 revenue of $16.89 billion, Danaher's life sciences and diagnostics and environmental two parts of the business revenue of $10.74 billion in 2014, while Agilent, Platinum Elmer, Bello and other well-known companies in 2014 revenue of billions of dollars. By contrast, Spotlight Technology and Tianmei Holdings, two of China's largest listed companies, had 2014 revenues of 1.243 billion yuan and 1.06 billion yuan, respectively, with most of the rest in the single digits.

In this way, in the case of a large gap in scale, in order to compete with foreign enterprises, only to come up with more high-quality products and services, but unfortunately, this is precisely one of the biggest weaknesses of the entire industry, which explains the instrument industry has been high deficit in recent years. According to some professional analysis, last year's trade deficit of more than $17 billion, a large part of it is in the scientific instruments branch. Among the industries that have been hot in the stock market this time, scientific instruments have been among the best.

Two of them are uncertain and tend to be passive.

Perhaps some people will think that this is just the environment, many industries in China have the same problem, and foreign enterprises and local enterprises have always been different positioning, each sell their own, it is not serious or not. If the economy is running smoothly or a little storm, it may be possible to think so, but the uncertain global economic situation in the past two years has often given rise to many unpredictable changes. At least in the past two years, the growth rate of the traditional market has been unable to meet the needs of those well-known enterprises. In the past 2014, large-scale corporate mergers and acquisitions were common around the world, involving huge amounts of money, such as Merck's $17 billion acquisition of Sigma-Aldrich and Thermo Feld's $13.6 billion acquisition of LifeTech. According to the "China Scientific Instrument Industry Development Report (2014)" pointed out that in 2014, the transaction volume of more than 100 million US dollars of instrument enterprise mergers and acquisitions integration cases, there are no less than 16, which does not include those transactions have not been announced.

All this marks the giants' eagerness to explore the market, and will this affect China? The question is not difficult to answer. Although the specific time can not be given, but China's huge market demand is undoubtedly a "cake", sooner or later, it is necessary to alert that the initiative is completely in the hands of those giants, although Chinese enterprises in the past two years also gradually began a wave of mutual mergers and acquisitions, but in terms of amount or influence, can not be compared with those foreign enterprises. Some bosses have asserted that "mergers and acquisitions between Chinese instrumentation companies will last more than 5 years or even 10 years in the future, resulting in several oligarchs to lead the entire industry," but within this period of time, what will the international giants do, we can't just wait passively. Once foreign enterprises begin to sink in the Chinese market and actively penetrate from the previous high-end market to the low-end market, then the enterprises in the industry may not be able to cope.

Admittedly, today's various policies to support the instrumentation industry, its starting point is undoubtedly good, transformation and upgrading, high-end manufacturing, including advocating for "cross-border" to find development opportunities, these are a long-term process, according to the survey, the ceos are still full of confidence in the future. But the current "turbulent" environment, like the muddy water, really let them do not know where to go. After all, can you imagine the consequences of telling investors that it might take 150 years to get their money back?

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