\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 88 Winner Medical Co.Ltd(300888) )
Events
The company disclosed the announcement on the acquisition of 55% equity of Longtai medical. The company plans to use its own funds of 728 million yuan to acquire 55% equity of Zhejiang Longtai Medical Technology Co., Ltd. from Mr. Wu Kangping, Ms. Huang Lepei and Mr. Wu Di. The parties to the transaction have signed an equity transfer agreement on April 8.
Key investment points
Longtai medical's high-end wound dressing business scale is leading in China. After excluding epidemic prevention products, its revenue increased by about 29% year-on-year in 2021. Longtai medical was founded in 2012. The founder, Mr. Wu Kangping, has over 20 years of clinical experience. The company mainly develops, produces and sells high-end wound dressing products such as silica gel foam, hydrocolloids, silicone gel, hydrogel, film applicator and stoma. It mainly exports to OEM, and more than 70% of its products are exported to dozens of countries and regions such as America and Europe. Meanwhile, it owns Innomed own brand business and China OEM business. In 2021, the operating revenue of Longtai medical was 350 million yuan / - 11.6%, and the net profit attributable to the parent company was 86.37 million yuan / - 32.6%, of which the revenue of high-end wound dressing business accounted for about 79%. If epidemic prevention products were excluded, the operating revenue in 2021 increased by about 29% year-on-year. After the completion of this transaction, Winner Medical Co.Ltd(300888) is the largest shareholder of Longtai medical, holding 55% shares, and natural persons Wu Kangping, Huang Lepei and Wu Di hold 22.5%, 18.0% and 4.5% respectively. Longtai medical owns three wholly-owned subsidiaries, Xi'an longtem, Longtai silica gel and Shengyi technology. The first two are mainly engaged in high-end wound dressing business, and the latter is engaged in the sales and operation of Longtai medical products on e-commerce platform.
High end dressing Market: the global market is expected to grow steadily in low single digits, and Chinese hospital channels are developing rapidly. In terms of global market, according to QYResearch's current situation and future development trend of global and Chinese high-end dressing market from 2021 to 2027 quoted in this announcement, the compound growth rate of global high-end wound dressing market from 2020 to 2027 is about 3.1%, and the global market scale will reach US $7.23 billion in 2027. With the increasing pressure of fee control in European and American markets and the increasing tendency of international customers to large-scale manufacturers with stable production capacity and quality, it is expected that China's export market of high-end wound dressings will maintain healthy growth and tend to be concentrated. In the Chinese market, the Chinese hospital high-end wound dressing market is still in the initial stage of rapid growth. At present, it is dominated by overseas brands such as 3M, Smith & nephew and monik. As China's medical insurance coverage becomes more and more comprehensive, doctors and nurses have a deeper understanding of products, and patients' requirements for treatment effect are upgraded, Chinese manufacturers have the advantage of production cost, and it is expected that the market growth potential and import substitution space are huge.
Winner Medical Co.Ltd(300888) high-end wound dressing business is growing at a high speed. In the future, it may acquire all the remaining equity of Longtai medical and move forward to the industry leader. From 2013 to 2020, the CAGR of the company's high-end wound dressing products was 26%. In the first half of 2021, the revenue of high-end wound dressing products was 43.74 million yuan, a year-on-year increase of 6.3%, accounting for 1.1%. The company's appraisal value of all shareholders' equity of Longtai medical is 1.337 billion yuan, corresponding to about 15 times of PE in 21 years. The parties to the agreement agree that if the compound annual growth rate of non net profit deducted by Longtai medical from 2021 to 2026 is not less than 5% or the cumulative non net profit deducted from 2022 to 2026 is not less than 474.6 million yuan, and the company still holds the equity of Longtai medical and the subsequent transaction is approved by the regulatory authority (if necessary), In 2027, the company will take the corresponding multiple of non net profit deducted by Longtai medical in 2026 as the valuation to acquire all the remaining equity.
Investment suggestion: as the volume and price of epidemic prevention products gradually return to normal, the central value of the company's main business income and net profit attributable to the parent company in 2021 were 8.05 billion yuan and 1.275 billion yuan respectively, with a year-on-year decrease of 35.8% and 66.5%. This equity transaction is highly consistent with the company's strategy of building a leader in the high-end wound dressing industry. It is expected to integrate the advantages of both sides, form a scale and leading effect, obtain a greater market share of high-end wound dressing, and highlight the dual wheel driving attribute of the company's medical treatment and consumption. We maintain the profit forecast. It is estimated that the net profit of the company from 2021 to 2023 will be 1.275 billion yuan, 1.546 billion yuan and 1.856 billion yuan, with earnings per share of 2.99, 3.63 and 4.35 yuan respectively. The closing price on April 8 corresponds to about 16 times of the company's 22-year PE, maintaining the "Buy-A" proposal.
Risk tip: the price of cotton fluctuated sharply, the business expansion of medical consumables in China was less than expected, and the store expansion in the cotton era was less than expected.
