\u3000\u3000 Shandong Linuo Technical Glass Co.Ltd(301188) (301188)
China’s leading borosilicate glass products enterprise has steadily improved its profitability. The company’s main products are medicinal glass, heat-resistant glass and electric light source glass. It is the location of the only China Meheco Group Co.Ltd(600056) Packaging Association medicinal glass training base in China. It has participated in the drafting of a number of national and industrial standards such as medicinal glass tubes, glass trays for microwave ovens and infrared bulbs. In 2020, the company achieved a revenue of 660 million yuan and a net profit attributable to the parent company of 91 million yuan; In 2021q1-3, the company achieved a revenue of 632 million yuan, a year-on-year increase of 39.73%, and a net profit attributable to the parent company of 94 million yuan, a year-on-year increase of 48.09%. The company’s net profit margin continued to rise, from 9.64% in 2017 to 14.93% in 2021q1-3, and its profitability was enhanced. Heat resistant glassware, glass tray for microwave oven and medium borosilicate medicinal glass bottle are the company’s core products, with 21h1 revenue accounting for 82.81%.
Medicinal glass: the related approval system promotes the improvement of industry concentration, and the consistency evaluation promotes the substitution of medium borosilicate medicinal glass for low borosilicate medicinal glass. With the promotion of the relevance review system, on the one hand, the cooperation viscosity between drug packaging enterprises and existing customers is further strengthened; On the other hand, pharmaceutical enterprises prefer to choose enterprises with R & D strength, production stability and capital scale advantages, so as to improve the industry concentration of pharmaceutical packaging industry. In addition, with the introduction of consistency evaluation and other policies, Chinese pharmaceutical enterprises will choose more borosilicate glass as drug packaging materials. Compared with low borosilicate medicinal glass, medium borosilicate medicinal glass has better performance, but the cost is 5-10 times higher than low borosilicate medicinal glass, and the replacement process takes 5-10 years to complete; According to chinaglass.com, it is estimated that 30% – 40% of pharmaceutical glass in China will be upgraded from low borosilicate glass and sodium calcium glass to medium borosilicate glass in the next 5-10 years. The price of medium borosilicate glass with the same specification is 5-10 times that of the former, and the potential growth space of injection glass packaging material industry alone will reach 1-3 times.
The company focuses on direct sales channels, with high-quality customer resources. The high-speed growth of 21h1 borosilicate medicinal glass is driven by the increase in the amount of heat-resistant glass. In 2019, the company’s market share of low borosilicate glass and sodium calcium glass was about 2.24%, and that of medium borosilicate glass was 8.35%. The company focuses on direct sales channels and daily glass OEM business model. The direct sales model from 2020 to 2021h1 has achieved revenue of 635 million yuan and 410 million yuan respectively, accounting for 98.37% and 98.19% of the revenue. In terms of customers, heat-resistant glass serves well-known customers such as Galanz, Midea, lekou lekou, pinchengbaolai, Helen Troy and so on; The downstream customers of electric light source glass are lamp manufacturers such as xinnuofei and landvance; Pharmaceutical glass customers include many large and medium-sized pharmaceutical manufacturers, such as Youcare Pharmaceutical Group Co.Ltd(688658) , China Resources Double-Crane Pharmaceutical Co.Ltd(600062) , new era pharmaceutical, Qilu pharmaceutical and other well-known pharmaceutical enterprises, with a cooperation period of more than 5 years.
1.6 billion pieces of medium borosilicate medicinal glass production expansion project and 23300 tons of high borosilicate glass production technical transformation project are expected to release performance increment. In 2020, the annual production capacity of the company’s medium borosilicate medicinal glass bottles / low borosilicate medicinal glass bottles / low borosilicate medicinal glass tubes / heat-resistant glass / electric light source glass will be 690 million, 1988 million, 12000 tons, 55600 tons and 3600 tons respectively. After the completion of the raised investment project, the production capacity of medium borosilicate ampoule bottle 700 million / year, medium borosilicate Cilin bottle 750 million / year, medium borosilicate cartridge bottle 150 million / year, heat-resistant glass appliance 19200 tons / year and high borosilicate glass lens block 4100 tons / year can be formed.
Profit forecast and Valuation: as a leading borosilicate glass product enterprise in China, the company has witnessed rapid growth in 21h1 of borosilicate medicinal glass, high-quality customer resources and steady improvement in profitability. It is estimated that the company’s operating revenue from 2021 to 2023 will be RMB 881 / 1159 / 1523 million, a year-on-year increase of + 33.51% / + 31.48% / + 31.48%, and the net profit attributable to the parent company will be RMB 124 / 166 / 221 million, a year-on-year increase of + 37.04% / + 33.34% / + 32.91%.
Risk warning: raw material import risk; Short term stock price fluctuation risk; Risk of intensified market competition
