Source of this article: Times Business School Author: Chen Jiaxin
Source: Times Investment Research
Author: Chen Jiaxin
Editor|Zheng Shaona
The disclosure rate of ESG reports in the A-share hospital industry (Shenwan Level 3) is significantly higher.
Times Investment Research statistics found that as of October 16, 2024, 67% of listed companies in the hospital industry have disclosed their 2023 ESG reports. In contrast, the overall disclosure rate of A-shares is 41%, and the disclosure of ESG reports in the hospital industry has gradually become the norm. This may be related to the TOC attribute of the hospital industry, and enterprises in the industry generally have the need to establish a good social responsibility image.
Last year, Jimin Health (603222. Ezhou Chengnan Hospital (1,000 beds), which has been invested and built for many years, was officially put into operation, and as of the end of the first half of this year, the cumulative number of approved beds of Jimin Health has approached 2,000.
According to the financial report, the current business of Jimin Health spans two sub-industries: medical consumables and hospitals, and medical consumables include injection and puncture instruments, infusion products, etc., which are currently the largest source of income for Jimin Health; In addition, in recent years, the hospital business has developed rapidly, and the proportion of related revenue has been increasing, and it currently has three hospitals.
For Jimin Health, which intends to expand its hospital business, how to establish a good social image through ESG may become a problem that it needs to consider.
However, since its listing in 2015, the outside world has never seen the "face" of the company's ESG report, and the social responsibility part of its financial report is also lackluster.
In this context, the overall third-party ESG rating of Jimin Health is not high, and the ESG score is generally at the lower middle level among A-share listed companies.
On October 11 and October 15, Times Investment Research sent letters to Jimin Health and called to inquire about ESG ratings, product quality and other issues, but the other party has not replied as of press time.
The third-party ESG rating is generally at the lower-middle level of A-shares
In the rating results of many domestic ESG rating agencies, Jimin Health shows a certain degree of controversy.
As shown in Chart 1, as of the date of the latest rating, Jimin Health's ESG rating is A, which is at the middle level of A-shares and at the upper middle level of the medical consumables industry (Shenwan Level 3, the same below). Straight Flush and SynTao Green Finance (2024/6/30) gave Jimin Health a medium ESG rating (BB and B), which is at the middle level of A-shares and the industry; The China Securities Index (2024/7/31) has a lower rating (CCC), which is at the lagging level of A-shares and the industry.
To be sure, the large difference in the third-party ratings of Jimin Health is not unrelated to the fact that the company has never disclosed ESG reports for many years after its listing.
Referring to the rating system of Straight Flush, whether or not to disclose ESG reports (including social responsibility reports) in the medical consumables industry has a greater impact on the rating. Among the 14 companies rated above BBB (including AA, A, and BBB) in the industry, only 2 have not disclosed ESG reports; Among the 21 companies rated below B (including B and CCC), only 1 has disclosed ESG reports.
The data shows that peers are accelerating the pace of ESG disclosure. According to Flush iFinD data, as of October 16 this year, the number of companies disclosing ESG reports in the medical consumables industry has increased from 9 last year to 16 currently, and the disclosure rate has also increased from 19% to 34%.
In recent years, Jimin Health has vigorously developed its medical service business, and its financial report shows that the proportion of medical service revenue has increased from 22% in 2021 to 38% in the first half of 2024. Jimin Health's medical services are mainly carried out around three hospitals: Boao International Hospital, Ezhou Chengnan Hospital and Ezhou Second Hospital, with a cumulative approved bed capacity of nearly 2,000.
The ESG report disclosure rate of the hospital industry this year is close to 70%, and the ESG disclosure work of Jimin Health is slightly behind.
In the context of poor ESG ratings and disclosure performance, what is the true level of ESG of Jimin Health?
Product quality, governance disputes, or impact ratings
Since the beginning of this year, there have been two ESG controversies in Jimin Health, which may affect its subsequent ESG ratings.
On August 5, the Shanghai Municipal Food and Drug Administration issued the "Notice on the First Phase of Drug Quality Sampling Inspection in 2024", and a total of 12 products were named in the summary table of non-compliance with drug sampling inspections, including sodium chloride injection produced by Jimin Health, and the unqualified items were "visible foreign bodies".
For the batch of products that do not meet the requirements for random inspection, drug regulatory departments at all levels have required relevant enterprises to take risk control measures such as suspension of sales, suspension of use, and recall, and investigate and deal with relevant enterprises in accordance with the law.
The quality of medical products has a significant impact on society, and there is a risk of endangering the health of consumers, and the drugs are unqualified or affect the social dimension (S) score in Jimin Health's ESG.
In addition, a regulatory alert in August also exposed gaps in Jimin Health's corporate governance (G).
According to Article 7 of the Rules for Independent Directors of Listed Companies, Article 3.5.4 of the Self-Regulatory Guidelines for Listed Companies No. 1 of the Shanghai Stock Exchange - Standardized Operation, and other relevant provisions, employees of listed companies shall not be candidates for independent directors.
According to the Shanghai Stock Exchange, Li Yongquan served as the chairman of the board of supervisors of Jimin Health from October 2016 to November 2022. On November 15, 2022, Li Yongquan was elected as an independent director of the fifth board of directors of the company until July 23, 2024, which violated the above provisions.
In view of the facts and circumstances of the above-mentioned violations, the Shanghai Stock Exchange issued regulatory warnings to Li Yongquan, then independent director of Jimin Health, and Zhang Qian, then secretary of the board of directors.
Suggestion: Establish a good image of social responsibility and strengthen the compliance awareness training of senior executives
In recent years, Jimin Health intends to vigorously develop the hospital business, which can also be seen from the order of business introduction in its financial report. Although the medical consumables business is still the largest revenue-generating business of Jimin Health, in the financial report, when introducing the business, Jimin Health still puts medical services in the first place.
The main customer of medical consumables of Jimin Health is the hospital (TOB), and the hospital business is mainly the TOC business, and the establishment of its own good corporate social responsibility image will help Jimin Health expand the hospital business.
In the "Environment and Social Responsibility" section of the 2024 semi-annual report, Jimin Health only listed measures in environmental protection, and social responsibility measures showed "not applicable". The work of social responsibility may be lacking, and the follow-up can consider establishing a good image of social responsibility through activities such as health poverty alleviation, free clinics, and free physical examinations.
In addition, the regulatory alert in August this year also exposed the lack of compliance awareness of directors, supervisors and senior executives of Jimin Health. Previously, Jimin Health had also failed to disclose price reduction information due to the price reduction of its related products, and was issued a warning letter by the Zhejiang Securities Regulatory Bureau. In the future, Jimin Health should strengthen the training of directors, supervisors and senior executives on relevant knowledge of laws and regulations to avoid violations caused by lack of knowledge of laws and regulations.
In the regulatory warning decision in August, the Shanghai Stock Exchange also required Jimin Health to formulate targeted preventive measures to effectively improve the company's information disclosure and standardized operation.
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