Ruipai Pet Hospital Valuation Analysis: Goodwill Risk and EV/EBITDA Framework

Based on search results and professional knowledge, I will conduct a valuation analysis of Ruipai Pet Hospital for you.

As a leading enterprise in China’s pet medical industry, Ruipai Pet Hospital has experienced rapid merger and acquisition expansion in the past few years. According to search results, the market size of China’s pet veterinary industry shows a continuous growth trend from 2022 to 2035 [1], and Mars has carried out a large number of investment and merger activities in the pet hospital field [2].

A high goodwill ratio usually stems from large-scale merger and acquisition activities, and this expansion model has the following risks:

1. Integration Risk
   : The difficulty of post-merger integration is often underestimated, including:
   • Integration and stability of medical teams
   • Implementation of service standardization
   • Unification of corporate culture

2. Impairment Risk
   : According to financial data, there is an impairment risk related to mergers and acquisitions from 2022 to 2025 [3]. Goodwill impairment will directly affect the company’s net profit and shareholders’ equity.

3. Valuation Bubbles
   : Goodwill is essentially an acquisition premium; when integration effects are not as expected, this part of the ‘bubble’ will be squeezed out.

From a professional valuation perspective:

• Eliminates the impact of differences in capital structure, tax policies, and depreciation and amortization policies
• Better reflects the true profitability of core businesses
• Particularly applicable to high-capital-expenditure industries (e.g., pet hospitals require a lot of equipment investment)

Indicator	Analysis Points	Risk Signal
EBITDA Margin	Industry average vs company actual	Sustained decline = poor integration effect
Revenue Growth vs Cost Growth	Reflection of synergy effects	Cost growth > revenue growth = negative
Working Capital Change	Integration efficiency	Deteriorated accounts receivable/inventory turnover = risk
Free Cash Flow	True profitability	Sustained negative = large valuation bubble

If Ruipai Pet’s EV/EBITDA multiple is significantly higher than the following benchmarks, it may not fully reflect integration risks:

• Peer Median
  : Mature pet medical markets usually range from 8-12x
• Historical Valuation Level
  : The lower end of the company’s historical trading range
• Intrinsic Value Calculation
  : Conservative scenario valuation based on DCF model

• High goodwill will push up Enterprise Value (EV), but this part of the value depends on future profitability
• If integration is unsuccessful, goodwill impairment will lead to EV ‘shrinkage’

• Gross margin and EBITDA margin trends
• Asset-liability ratio and interest coverage ratio
• Matching degree between operating cash flow and net profit
• Dependence on the single largest customer/supplier

• EV excluding goodwill better reflects core asset value
• Using EBITDAR (add back rent) more accurately reflects the true cost structure of chain operations
• Consider using EV/EBITDA adjusted (adjust for non-recurring items and integration costs)

When evaluating Ruipai Pet’s valuation from the EV/EBITDA perspective, the following points need to be focused on:

1. Whether the Multiple Is Too High
   : If the current trading multiple is more than 15-20% higher than the industry average, it may not fully reflect goodwill impairment and integration risks

2. Trend Is More Important Than Absolute Value
   : The marginal change in EBITDA margin is more informative than the valuation multiple at a single point in time

3. Scenario Analysis
   : It is recommended to conduct sensitivity analysis and assume valuation ranges under different integration success probabilities

: For targets with a goodwill ratio exceeding 50%, investors should:

• Require management to provide detailed integration progress and expected synergy timeline
• Pay attention to goodwill impairment test results in subsequent financial reports
• Consider giving a 15-25% ‘integration risk discount’ in valuation

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[1] China Pet Veterinary Industry Market Size Forecast (https://images.finet.hk/photoLib/content/202512_1/fa3c351a-db04-4d97-85b4-ce95ff43776a.png)
[2] Mars Investment and Merger Activity Analysis (https://img.36krcdn.com/hsossms/20251226/v2_1dd7009508c948a49343fd780d7deb7b@000000_oswg294875oswg962oswg951_img_000)
[3] Merger-related Financial Data and Impairment Risks (https://inews.gtimg.com/om_bt/OT9v4N2cFEvNBpn6mlStGDXX1w_ipIy_GiODYz01ugPUEAA/641)