\u3000\u30003 Zhejiang Kingland Pipeline And Technologies Co.Ltd(002443) 00244)
Key investment points
Event: on April 15, 2022, the company released the annual report of 2021 and the performance forecast of the first quarter of 2022. In 2021, the company achieved an operating revenue of 13.083 billion yuan, a year-on-year increase of 22.9%; The net profit attributable to the parent company was 1.163 billion yuan, a year-on-year increase of 44.8%; The net profit deducted from non parent company was 1.093 billion yuan, with a year-on-year increase of 47.8%, maintaining a rapid growth. In the first quarter of 2022, the company expects to realize a net profit attributable to the parent company of RMB 711813 million, with a year-on-year increase of 110% - 140%.
ICL leaders continued to increase their volume, and the performance of 22q1 exceeded market expectations. In the fourth quarter of 2021, the company realized an operating revenue of 33.744 billion yuan (+ 17.87%), with a net profit attributable to the parent of - 69.85 million yuan and a net profit not attributable to the parent of - 72.84 million yuan. The company's revenue in a single quarter maintained rapid growth, mainly due to the heavy volume of covid-19 nucleic acid testing business and the recovery of routine diagnosis and treatment business. The provision for Q4 asset impairment had a certain impact on the profit side. In 2022q1, the epidemic broke out in many places across the country, and the outpatient activities of hospitals were significantly impacted. The company still maintained a high growth trend. In 22q1, it is expected to realize the return of 711813 million yuan to the parent, with a year-on-year increase of 110% - 140%. We expect that covid-19 detection business will make a great contribution, and the routine ICL and product business are also recovering rapidly.
The large-scale effect of laboratory diagnosis business is prominent, and it maintains good profitability under the downward trend of covid-19 test price. In 2021, the sales expense ratio was 9.25%, with a year-on-year increase of 0.18pp, which was mainly due to the increase of sales promotion investment (+ 25.25%) while the company's business scale was expanded. The management expense ratio was 8.47%, with a year-on-year increase of 1.28pp, which was mainly due to the amortization of equity incentive fee, with a year-on-year decrease of 0.18pp in the financial expense ratio of 1.66%, and a year-on-year increase of 0.25pp in the R & D expense ratio of 3.25%. In terms of profit margin, the proportion of the company's conventional ICL business in the overall revenue is increasing, and the scale effect of laboratory operation is becoming more and more prominent. At the same time, the natural decline of covid-19 test price is superimposed, and the overall profitability remains stable. In 2021, the company's gross profit margin was 38.26%, an increase of 0.04pp year-on-year; The net interest rate was 11.34%, a year-on-year increase of 1.29pp.
Conventional ICL achieved rapid growth of over 30%, and the proportion of special inspection increased to more than 40%. In 2021, the company's diagnostic service revenue was 6.62 billion yuan, a year-on-year increase of 30.25%, an increase of 127.10% over 2019; The regular income excluding covid-19 nucleic acid was 4.014 billion yuan, a year-on-year increase of 31.97% and 37.69% compared with 2019. With the linkage mode of provincial central laboratory + municipal regional laboratory + cooperation and co construction laboratory, the company has maintained rapid development under the disturbance of epidemic situation. At present, 34 central laboratories have achieved profits; At the same time, the precision diagnosis centers built in cooperation with class III and class A hospitals have gradually matured. 13 of the 30 precision diagnosis centers have made profits, with a revenue growth rate of about 50%; In terms of inspection items, the company continued to increase the investment in special inspection product line, and promoted the development of special inspection business through academic alliance, technology platform, precision center, accompanying diagnosis and other strategies. In 21 years, the special inspection revenue reached 1.46 billion yuan (+ 45.85%), accounting for more than 40% of ICL revenue. With the gradual improvement of epidemic prevention and control in China, we believe that ICL business is expected to continue to accelerate the recovery and affect the improvement of overall performance.
The growth rate of independent products exceeded 75%, driving the accelerated recovery of product business. In 2021, the company's product business revenue was 7.321 billion yuan, a year-on-year increase of 21.37%; Among them, the income from self-produced products was 659 million yuan, a year-on-year increase of 75.30%; The revenue of channel products was 6.662 billion yuan, a year-on-year increase of 17.78%. The company attaches great importance to the linkage between ICL business and product business. Its independent products directly enter the third class hospitals through the project cooperation of the precision diagnosis center. At the same time, it also expands the sales network with the help of mature agency channels to achieve rapid growth. At present, the company has completed the layout of three independent product lines of molecular diagnosis, cell pathology and mass spectrometry diagnosis, and polished mature products with strong competitiveness in the fields of liquid chromatography mass spectrometry, nucleic acid mass spectrometry, molecular diagnosis and cell pathology. It is expected to achieve high-speed growth with the help of the existing sales network in the future.
There is a strong demand for nucleic acid detection, and covid-19 business is expected to contribute to stable cash flow. In 2021, covid-19 virus broke out repeatedly in China, and the epidemic spread seriously. During this period, the company achieved covid-19 nucleic acid detection revenue of 2.606 billion yuan and completed covid-19 nucleic acid detection of about 49 million tubes, totaling more than 128 million people (about 25 million people in the same period last year). At present, China's epidemic prevention and control is still not optimistic. Combined with the progress of 22q1 epidemic, we believe that local governments still have strong demand for large-scale screening, and nucleic acid testing is expected to continue to achieve better than expected performance.
Profit forecast and investment suggestions: according to the annual report data and the development of covid-19 nucleic acid detection in Q1 China, the annual nucleic acid detection volume in 2022 is increased. It is estimated that the company's revenue from 2022 to 2024 will be 15.961 billion yuan, 15.409 billion yuan and 16.517 billion yuan (13.304 billion yuan and 14.602 billion yuan in the previous 22-23 years), with a year-on-year increase of 22%, - 3% and 7%; The net profit attributable to the parent company was 1.720 billion yuan, 1.650 billion yuan and 1.785 billion yuan (1.385 billion yuan and 1.495 billion yuan in the 22-23 years before adjustment), with a year-on-year increase of 48%, - 4% and 8%; The corresponding EPS is 2.77, 2.66 and 2.88 yuan. Considering the repeated outbreaks of the epidemic, it is expected that covid-19 testing revenue is expected to remain high, while conventional business is expected to continue to grow rapidly and maintain the buy rating.
Risk warning events: the risk of uncertain laboratory profit time, product development risk, accounts receivable management risk, covid-19 epidemic duration risk.
