\u3000\u3 Shengda Resources Co.Ltd(000603) 987 Shanghai Kindly Enterprises Development Group Co.Ltd(603987) )
Event overview
On April 20, 2022, the company released its annual report for 2021. In 2021, the company achieved an operating revenue of 3.097 billion yuan, a year-on-year increase of 17.07%, a net profit attributable to the parent company of 291 million yuan, a year-on-year increase of 43.71%, and a net profit not attributable to the parent company of 257 million yuan, a year-on-year increase of 39.23%.
The company issued the profit distribution plan for 2021. It plans to distribute cash dividends of RMB 2.0 per 10 shares to all shareholders with undistributed profits, totaling RMB 88.204 million, accounting for 30.27% of the net profit attributable to shareholders of the parent company in the consolidated statements.
The core business grew steadily and overseas markets continued to expand. In 2021, the company’s core business medical device manufacturing sector achieved a revenue of 3.087 billion yuan, with a year-on-year increase of 17.03%. Driven by the steady release of early-stage production capacity, the effect of centralized procurement winning the bid and the expansion of demand for syringes and injection needles catalyzed by the epidemic, the company’s overall performance increased steadily, including the revenue of cost needle products increased by 33.67%, the revenue of syringe products increased by 43.53% and the revenue of intervention products increased by 45.32% year-on-year. In addition, the company took the initiative to change the foreign trade sales mode and strengthen the project cooperation system. It not only strengthened the independent brand construction in the European market by setting up subsidiaries overseas, but also through in-depth cooperation with European and American circulation giants. Its products were distributed in more than 50 countries and regions such as the United States and Europe. In 2021, its overseas business realized a revenue of 1.042 billion yuan, a year-on-year increase of 24.91%, and the overseas market continued to deepen and expand.
The company’s business quality continues to improve and its overseas competitiveness continues to improve. In 2021, the company achieved a gross profit margin of 38.38%, a slight decrease of 0.2pct over the same period, a net profit margin of 13.54%, a year-on-year increase of 1.2pct, and the company’s profitability continued to improve. Although the gross profit margin of self operated export business decreased by 0.95pct due to the impact of exchange rate, and the gross profit margin of medical equipment (gross profit margin was -7.48pct year-on-year) and special consumables (gross profit margin was -5.09pct year-on-year), with the cost reduction and efficiency increase under the upgrading of product structure and automation, the gross profit margin of the company’s core business medical device manufacturing sector was 38.40% in 2021, an increase of 1.07pct year-on-year. 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 2021, the gross profit margin will be 37.59%, an increase of 2.77 PCT compared with 2020, and the overseas competitiveness will continue to improve.
Low cost advantage + consumption innovation help the company grow and transform continuously. With the help of low-cost advantages, the company actively participated in product bidding and penetrated the blank market under the background of the normalization of medical insurance fee control and centralized procurement bidding. The company’s indwelling needle and functional infusion set and other products have been successfully included in the centralized procurement catalogue. Taking the indwelling needle with low market share as an example, it is expected that the market share of China will only be 2.8% in 2019. With low-cost advantages and good quality, the company won the bid for centralized procurement projects in central and Western China and North China in 2021, And drive the overall product sales volume through centralized purchase and supply channels; In addition, the company obtained China’s first registration certificate of three types of medical devices for beauty needles in October 2021 and started listing. Under the background of promoting the standardization of medical and beauty devices across the country, the company’s one-time injection beauty bag, based on the first mover registration advantage and solid sales network, helped accelerate the shift of performance. At the same time, the company increased its innovation efforts. In 2021, the R & D investment was 185MILLION yuan, accounting for 5.98%, an increase of 1.22pct year-on-year. Among them, the 510k registration submission of new products such as disposable safety syringes / injection needles has been completed, and new products such as safety blood collection needles, safety insulin pen matching needles and safety indwelling needles will also be launched one after another, laying a solid foundation for product iteration and upgrading.
Strengthen the construction of production capacity and further consolidate the advantage of low cost. The company plans to invest a total of 66158 million yuan in 2022 to strengthen large-scale production capacity, involving various projects of the company’s group headquarters, Zhejiang, Guangdong and Shanghai companies. The construction investment projects include Shanghai plant area (150 million yuan), Shandong production base and academic training center (100 million yuan), Zhuhai plant area (50 million yuan), Beilun River plant area (40 million yuan), production equipment in Shanghai plant area (66 million yuan) Production equipment in Zhejiang plant area (46.3 million yuan) and production equipment investment in the company’s headquarters (27.45 million yuan). Through the above investment in fixed assets, it is expected to update some backward production equipment, further improve production and operation capacity and consolidate the company’s low-cost advantage.
Investment advice
We predict that the net profit attributable to the parent company in 202224 will be RMB 391 / 486 / 597 million, with a year-on-year increase of 34.2% / 24.3% / 22.7%, corresponding to EPS of 0.89/1.10/1.35, and PE valuation of 22-24 will be 18.94/15.23/12.42 times. 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
