Hengtong Shares Acquires for 274 Million to Perfect Biotech Portfolio; Target Valuation Increases 522% with 255 Million Performance Commitment

Changjiang Business Daily News ● Changjiang Business Reporter Zhang Lu

Hengtong Co., Ltd. (600226.SH) plans to enhance its product layout in the biotechnology sector.

On March 13, Hengtong announced that it intends to acquire a 40% stake in Chongqing Aolong Biological Products Co., Ltd. (hereinafter referred to as “Aolong Biological”) held by Huapai Biotechnology (Group) Co., Ltd. (hereinafter “Huapai Biological”) with self-raised funds or internally raised capital of 274 million yuan.

Hengtong focuses on dual main businesses in biotechnology and functional copper foil. This acquisition will further complete the company’s product matrix in the biotech sector and strengthen its comprehensive competitiveness in veterinary drugs, vaccines, and feed additives.

Changjiang Business Daily notes that the target company has strong profitability. From January to August 2025, Aolong Biological’s revenue reached 146 million yuan, with net profit rising to 64.84 million yuan. Both parties have set performance commitments for the next three years, with total profits not less than 255 million yuan.

Enhancing the Biotechnology Sector Layout

Recently, Hengtong announced its plan to acquire a 40% stake in Aolong Biological held by Huapai Biological for 274 million yuan. After the completion of this acquisition, Hengtong will become an important shareholder of Aolong Biological. The target asset will not be consolidated into the financial statements, and the transaction does not constitute related-party dealings or a major asset restructuring.

The valuation used for this acquisition is based on the income approach, which shows a high appreciation. As of August 31, 2025, Aolong Biological’s net asset book value was only 121 million yuan, but the valuation based on income approach was as high as 752 million yuan, an increase of 631 million yuan, with an appreciation rate of 521.71%. After negotiations, the overall valuation of the target company was adjusted downward to 685 million yuan, making the 40% stake worth 274 million yuan.

To protect the interests of the listed company, both parties have set performance escrow clauses. Huapai Biological commits that from 2026 to 2028, the minimum of the non-recurring profit attributable to the parent company and the net profit attributable to the parent company will be no less than 80 million, 85 million, and 90 million yuan respectively, with an average annual net profit of no less than 85 million yuan over three years, totaling no less than 255 million yuan.

Public information shows that Aolong Biological was established in December 2007 with a registered capital of 50 million yuan. It is a professional biotech company specializing in the research, production, sales, and technical services of animal vaccines. Its core products cover vaccines for major animal diseases such as foot-and-mouth disease, brucellosis, and swine fever, with a leading position in vaccines for ruminants like cattle and sheep.

In terms of performance, the target company has shown significant growth: in 2024, revenue was 142 million yuan, with a net profit of 19.56 million yuan; from January to August 2025, revenue reached 146 million yuan, with net profit soaring to 64.84 million yuan, reflecting substantial profit growth.

Before the transaction, Aolong Biological was held 96% by Huapai Biological and 4% by Chongqing Paiheng Aotong Enterprise Management Center (Limited Partnership). Xie Jianyong became the actual controller of the target company through control of Huapai Biological. After the equity acquisition, Huapai Biological will remain the controlling shareholder, and Hengtong will enter the high-growth animal vaccine sector through an equity stake.

Currently, Hengtong’s biotech business mainly focuses on veterinary drugs, feed additives, veterinary chemical medicines, and amino acid products, with a relatively concentrated product structure. Aolong Biological specializes in animal vaccines, which are highly complementary to the company’s existing business. This transaction will help build a complete product matrix covering veterinary vaccines, veterinary drugs, and feed additives, enabling horizontal expansion of product lines.

Copper Foil Business Supports Growth

Public information shows that Hengtong currently focuses on dual main businesses in biotechnology and functional copper foil. The biotech sector mainly involves the research and production of veterinary drugs and feed additives, with core products including veterinary chemical medicines and amino acid additives. The functional copper foil business is operated by its wholly owned subsidiary, Hengtong Precision Copper Foil Technology (Deyang) Co., Ltd. (“Hengtong Copper Foil”), covering lithium battery copper foil and electronic circuit copper foil.

In terms of performance, from 2022 to 2024, the company’s revenue grew from 602 million yuan to 1.335 billion yuan; during the same period, net profits attributable to the parent were 482 million yuan, 166 million yuan, and 189 million yuan, showing fluctuations. In the first three quarters of 2025, Hengtong achieved revenue of 1.262 billion yuan, up 38.94% year-on-year; net profit was 189 million yuan, up 0.68%.

As the core engine of the company’s growth, copper foil capacity has been gradually released, with continuous contribution increases. In the first half of 2025, Hengtong Copper Foil achieved revenue of 553 million yuan, accounting for 67.59% of the company’s total revenue. Copper foil sales increased significantly by 131.33% year-on-year, with gross profit margins improving, making it a key driver of overall company growth.

Changjiang Business Daily notes that while expanding scale, Hengtong has increased R&D investment. From 2023 to the first three quarters of 2025, R&D expenses were 17.54 million yuan, 40.76 million yuan, and 59.48 million yuan respectively.

Currently, the company can supply full batch products in the 4.5μm-8μm range for lithium battery copper foil and has mastered high-end 3.5μm copper foil production technology. It is also actively developing advanced technologies such as porous copper foil and atomized copper foil. As of the end of the first half of 2025, the company and its subsidiaries had obtained 57 patents, including 35 invention patents and 22 utility model patents, continuously strengthening its technological barriers.

From an industry outlook, electronic circuit copper foil, as a key basic material in the electronics information industry, is widely used in communication equipment, consumer electronics, automotive electronics, and other fields. Market demand is highly linked to AI computing power, 5G communication, and new energy vehicle industries. According to Prismark, a leading industry research firm, the global PCB output value is expected to grow at a CAGR of 5.2% from 2024 to 2029. China’s high-end electronic circuit copper foil products face long-term trade deficits, with significant import substitution potential.

Hengtong is advancing customer development and capacity expansion simultaneously. It is reported that the lithium battery copper foil achieved mass production in 2024 and has successfully entered the supply chains of mainstream power and energy storage companies such as BYD, Penghui Energy, and Xinwangda.

As of the 2025 interim report, Hengtong’s electronic circuit copper foil capacity is 10,000 tons/year, lithium battery copper foil capacity is 5,000 tons/year, and the first and second phases of copper foil capacity expansion are under construction, reaching 10,000 tons/year. With the gradual commissioning of new capacity, the company’s market competitiveness is expected to further improve.

Editor: ZB