Qingdao Novelbeam Technology Co.Ltd(688677) (688677)
Endoscope upstream manufacturing industry: demand driven growth and vertical expansion of scale
The hard mirror market scale is expected to maintain a compound growth rate of 11% from 2020 to 2024, driving the stable growth of upstream manufacturing scale. Hard tube endoscope (hard endoscope) is the most common endoscope, which is mainly used for the observation of minimally invasive surgery. The upstream manufacturing industry of endoscope mainly produces three core modules of endoscope: lens, light source and imaging module, such as Qingdao Novelbeam Technology Co.Ltd(688677) It mainly produces lenses and light source modules and supplies them to downstream endoscope manufacturers. From 2015 to 2019, the scale of China’s hard mirror market increased from 4.5 billion yuan to 6.5 billion yuan, cagr13.5 billion yuan Frost & Sullivan predicts that from 2020 to 2024, the market scale will be cagr11%. We believe that the continuous growth of hard mirror market is expected to drive the continuous and stable growth of upstream manufacturing industry.
We believe that the window period of vertical expansion of China’s endoscope upstream is open, and product quality and innovation are very important.
China is in a period of rapid growth in endoscope demand, the market is occupied by overseas leaders, and policies encourage domestic innovation and substitution. We believe that if the endoscope component manufacturing industry wants to expand its scale, developing the whole machine downstream is undoubtedly the best choice. Reasons: (1) the stability of overseas leading suppliers is high and it is difficult to enter; the market scale of domestic enterprises is small and the road to development is long. (2) upstream enterprises have cost advantages and stronger supply chain control ability. Although the channels of upstream enterprises are weak, under the current policy environment, high-quality product quality and innovative products are more conducive to opening downstream channels.
Qingdao Novelbeam Technology Co.Ltd(688677) : an upstream manufacturing enterprise of endoscope, and the whole machine expands to the downstream
Endoscope upstream manufacturing industry, strong export capacity. The company’s main products are endoscope lens and light source module, accounting for 73.51% of the revenue in 2020. The products are mainly exported to Europe and America, and the main customers are global endoscope leader Stryker. In 2020, the total revenue of single customer of Stryker accounted for 64.25%. The company’s high export proportion is mainly due to better product quality, stable customer resources and supplier system.
Expand the downstream to the whole machine, based on Shandong and expand the whole country. The market is worried that the company’s complete machine directly competes with downstream customers such as Stryker, affecting the cooperation between the two sides. However, we believe that unlike the three-level hospitals positioned by head manufacturers such as Stryker, the company’s products mainly take the sinking channel. The cooperation between the two will continue to be stable in the short term, and the expansion of new channels is the primary issue that needs to be paid attention to. We believe that the company’s strategy of relying on the channel advantages in Shandong Province, establishing brand image and then expanding the whole country is an effective strategy for channel expansion.
Semi customized innovative products are the development direction. We believe that the core competitiveness of the company is the controllable whole industry chain, the product quality recognized by Europe and America, and the ability to quickly innovate products for clinical pain points. Under the current development prospect of solving market pain points, we believe that differentiation strategy is a better strategic choice for the company. The company is actively communicating with clinicians, carrying out research and development for clinical use and pain points of departments, taking the practical solution of clinical pain points as the guidance, carrying out “semi customized production” according to the clinical needs of different departments, and expanding the Chinese market by using the advantages of differentiated products.
Profit forecast and valuation
Based on the above analysis, we estimate that the total operating revenue of the company from 2021 to 2023 will be RMB 336 / 466 / 622 million respectively, with a year-on-year increase of 22.2%, 38.5% and 33.6% respectively, and the net profit attributable to the parent company will be RMB 122 / 171 / 227 million respectively, with a year-on-year increase of 26.40%, 40.22% and 33.05% respectively, corresponding to EPS of RMB 1.78, 2.49 and 3.32 from 2021 to 2023. Referring to the valuation of comparable companies in the industry, 56 times PE in 2022 is given, Corresponding to the target price of RMB 139.44, it is rated as “overweight” for the first time.
Risk statement
Risk of revenue fluctuation of Stryker; The risk that the whole machine sales are less than expected; Risk of continued covid-19 epidemic; Risk of R & D falling short of expectations.
