\u3000\u3 Shengda Resources Co.Ltd(000603) 987 Shanghai Kindly Enterprises Development Group Co.Ltd(603987) )
Investment summary
Deeply cultivate the infusion and puncture industry, and the industrial layout and equity incentive help the performance to a new level. The company was founded in 1987, formerly known as Ouhai Yongzhong medical instrument plastic factory. At present, it has become a leading enterprise with a complete medical puncture instrument industry chain in China, covering all links from stainless steel welded pipe manufacturing to medical puncture instrument assembly, packaging, sterilization and so on. With the help of the two wheel drive mode of "industry and capital", the company acquired Guangxi Ouwen in August 2019, expanded the company's influence in Guangxi and even South China, and invested in meixibao medical beauty platform in early 2022 to enter the upstream supply chain of medical beauty. Through strategic industrial layout, actively infiltrate the subdivided industries with high prosperity, and quickly adapt to the new business forms of industry development. In addition, the company has set up equity incentive plans with higher unlocking conditions to further stimulate the enthusiasm of all employees and help their performance to a new level.
The infusion and puncture industry continues to expand and upgrade, and domestic leaders are expected to benefit from the advantage of low cost. With the continuous enrichment of downstream application scenarios (hyaluronic acid beauty needle, hair transplant needle, assisted reproduction egg taking needle, chronic management insulin needle, etc.), in the next 10 years, based on China's huge population base, the transformation of customer consumption awareness and the improvement of consumption ability, it is expected to help the continuous expansion and upgrading of infusion and puncture industry. At the same time, with the continuous promotion of the procurement of low-value consumables in China, Chinese infusion and puncture platform enterprises are expected to occupy more market share by virtue of cost advantages, rich product system and service capacity, driving the improvement of industry concentration.
Low cost advantage + consumption innovation help the company grow and transform continuously. 1) Indwelling needle: the market share of indwelling needle of the company is relatively low, and it is expected that the market share of China will only be 2.8% in 2019. Relying on the advantages of low cost and good quality, the company has won the bid for centralized procurement projects in central and Western China and North China, which is expected to drive the increase of performance; 2) Beauty blunt needle: in October 2021, the company obtained the first registration certificate of three types of medical devices for beauty needles in China. Under the background of promoting the standardization of medical and beauty devices across the country, the company's one-time injection beauty bag is expected to gradually increase its volume in 2022 based on the first mover registration advantage and solid sales network; 3) Insulin needle: the price reduction of insulin centralized purchase brings about the improvement of insulin accessibility. With the popularization of compliance use education of insulin pen needle, the penetration rate of insulin pen needle is improved. In addition, the company's disposable and safe insulin pens and needles are expected to continue to be used in large quantities with the help of Online + offline platforms with the advantage of high cost performance.
The company's business quality continues to improve and its overseas competitiveness continues to improve. Through endogenous drive (cost reduction and efficiency increase under the upgrading of product structure and Automation) + epitaxial expansion (M & A of Guangxi Ouwen's new in vitro diagnosis, medical equipment and other businesses), the gross profit margin increased from 33.44% to 39.6% and the net profit margin increased from 11.38% to 13.2% in the first three quarters of 20172021, and the profitability of the company continued to rise. In addition, the company continues to expand its international business. The optimization of product structure has led to a gradual increase in the gross profit margin of overseas business. In 2020, the gross profit margin was 36.6%, an increase of 9.5pct compared with 2017. The gross profit margin has increased steadily for three consecutive years, and the overseas competitiveness has continued to improve.
Profit forecast
"Buy" rating is recommended. We expect that the company will realize a net profit attributable to the parent company of RMB 291 / 391 / 486 million in 202123, with a year-on-year increase of 43.5% / 34.4% / 24.3%, corresponding to EPS of 0.66/0.89/1.10 and PE valuation of 31.38/23.35/18.78 times in 21-23. We continue to be optimistic about the upgrading and expansion of the infusion and puncture industry. As an industry leader, the company is expected to enjoy the dividends of industrial expansion and upgrading by virtue of integrated industrial chain, low cost advantage and continuous product innovation. At the same time, with the help of industrial layout, the company extends its tentacles to high growth segments, which is expected to further consolidate its moat and improve its performance.
Risk tips
Risks related to industry supervision, product liability risk, exchange rate change risk, dealer management risk, product R & D risk, etc
