BGM transformed by rapid series of AI acquisitions

The company looks set for big growth after adopting a Salesforce-like strategy of acquisitions and expansion to build an AI productivity platform

Key Takeaways:

• BGM has been rapidly transforming from a traditional drug maker to an AI services provider through a rapid series of acquisitions worth more than $460 million
• The company aims to develop a low-barrier AI productivity toolset and collaborative ecosystem tailored for startups and individuals in China

By Doug Young

AI isn’t just transforming the world. It’s also the main force powering a massive transformation at BGM Group Ltd. (BGM.US), which is casting off its origins as a maker of traditional medicines, licorice and other mundane products to try to become China’s latest artificial intelligence (AI) sensation.

BGM’s transformation has happened at lightning speed, starting last November with a rapid series of acquisitions collectively worth $460 million or more, turbocharging its market value and revenue over the last six months. The company made the purchases without spending a penny in cash, issuing new shares instead that have driven its shareholder equity to more than $460 million, up tenfold from the $43 million before the buying spree began. The company said it aims to achieve a quick transformation to capture opportunities in the AI application market and establish a closed-loop business model in AI-driven solutions.

The list of industries it plans to cover keeps growing with each acquisition and currently covers everything from the insurance to robotics and its original focus on drugs.

The rapid transformation has lit a fire under BGM’s stock, which is up about 50% so far this year and has nearly doubled since the first acquisition announcement late last November. Such a big increase should come as little surprise, since the original merger, involving an insurance AI asset, would have nearly doubled BGM’s reported revenue of $25 million for its fiscal year through last September to $48 million on a pro forma basis. It hasn’t given financials on all the acquisitions since then, but the figure for the current year through September 2025 will almost certainly double again, likely to reach $100 million or more.

Originally a pharmaceutical firm producing licorice and heparin, BGM saw its revenue drop sharply from $65 million in 2022 to $25 million it its latest fiscal year through September 2024. The company’s new CEO Chen Xin – a National University of Singapore physics graduate and former algorithms engineer at leading drone maker DJI and car giant Geely – is now steering BGM toward AI technology to transform its struggling core business.

According to a report by McKinsey, 75% of AI’s potential value is concentrated in four areas, namely, sales and marketing, customer operations, software development and product R&D. An expected surge in the number of solo entrepreneurs and freelancers in China, to as much as 250 million, is creating a massive opportunity for AI productivity tools targeting individuals and small- to medium-sized business. With its accessible, affordable and high-performance AI productivity platform, BGM aims to generate revenue from both consumer-facing (2C) and business-facing (2B) enterprises and individuals.

Over the short- to medium-term, the company aims to develop industry large models for use in its various focus sectors, improve model training efficiency by 40% and lower the threshold for AI application development to make it accessible to ordinary business personnel. It also plans to develop process libraries, rule engines and other tools that can shorten the solution delivery cycle by up to 30%.

Starting with insurance

The first signs of change brewing at BGM came late last November, when it announced plans to acquire two companies, RONS Intelligent and Xinbao Inc., giving it control of Duxiaobao, a platform that uses big data and AI technology to offer personalized insurance analysis services like risk and accident assessment.

BGM paid for the acquisition by issuing 70 million of its shares to the sellers, including leading AI company Baidu (BIDU.US; 9888.HK) and AIFU Inc. (AIFU.US), at a valuation of $2 per share, valuing the deal at $140 million. BGM said the purchase would allow it to leverage AIFU’s nearly 5 million sales personnel and 17.6 million client households, combined with Baidu’s 704 million monthly active users, to grow Duxiaobao’s business. BGM said it also planned to use Duxiaobao to achieve global growth in its older pharmaceutical and health businesses.

The company announced its next major acquisition in March with plans to issue 47.5 million new shares, again valued at $2 each, to acquire YX Management Co. Ltd., described as a “leading intelligent mobility technology platform.”

On April 21 it announced the next acquisition, this time saying it would issue 38.1 million shares, also at a valuation of $2 per share, for Wonder Dragon Global Ltd. BGM said Wonder Dragon owned more than 3,000 metric tons of raw and finished Qingzhuan dark tea, known for its medicinal and historic value, which it would use to accelerate its healthcare strategy.

In May, as part of its AI-driven growth strategy, BGM acquired Beijing Shuda Technology and NewStar Media Technology. By integrating Shuda’s industry-specific intelligent modules and NewStar’s 150,000-user network, BGM believes it can bolster its AI-driven enterprise efficiency optimization and private domain marketing capabilities.

Most recently, BGM announced its plan to acquire Xingdao Intelligent, a maker of embodied AI robots, and Hong Kong-based AI fintech company YD Network, advancing its multi-agent AI strategy. The deals brought BGM rights to 300 robotics patents and financial qualitative technologies, expanding BGM’s capabilities into physical automation and financial markets. It believes the purchases will create cross-industry AI synergies while completing its “perception-to-execution” technology stack.

One of the biggest challenges for Chen and his team in the next year or two will be integrating all of these various acquisitions, which have different focus areas and are also spread across China. But as we’ve already noted, those acquisitions will greatly boost the company’s revenue and presumably give BGM strong revenue growth as they get integrated and achieve greater synergies.

In addition to raising the company’s revenue, the string of acquisitions should also greatly boost most of BGM’s other major business metrics. Its pro forma gross profit, including the original Duxiaobao acquisition, would have been $11.4 million for the 12 months through September 2024, nearly triple the $4.1 million the company actually reported. And its pro forma gross margin would have risen sharply to 23.8% from a reported 16.4% for that period.

BGM was losing money before the acquisitions, including a $1.44 million loss for its fiscal year through last September. Those losses could well rise with the addition of so many new acquisitions, since many of them are still in their relatively early phases. But if Chen and his team can successfully integrate all the pieces – which could be a big “if” – they could potentially build a relatively large new AI giant fairly quickly, which could bring big rewards for early investors willing to take a risk on such a bet.

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