\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 88 Winner Medical Co.Ltd(300888) )
In 2021, revenue / performance fell sharply under the high base. 1) In 2021, the scale of the company shrank year-on-year under the high base: the annual revenue / performance was 8.04/1.24 billion yuan respectively (excluding the impact of 70 million share based payment fees, the performance was about 1.31 billion yuan), a year-on-year decline of 35.9% / 67.5% respectively in 2020 and a significant increase of 76% / 127% year-on-year in 2019; 2) The revenue performance of 2021q4 was RMB 2.22 billion / 140 million respectively, a year-on-year decrease of 26.3% / 79.5% respectively. 3) At present, the profit quality has been normalized: in 2021, the company’s gross profit margin decreased by 9.7pcts to 49.9% year-on-year; The sales / management expense ratio was + 12.2 / + 2.2pcts to 24.7% / 5.7% respectively (the increase in the sales expense ratio was mainly due to the decline in the scale of revenue in 2021 and the increase in the company’s investment in product publicity and marketing); The net interest rate fell sharply by 15.1pcts to 15.4%.
2022q1 revenue + 2.4% / performance – 26%. 1) In 2022q1, the company’s revenue / performance was RMB 2.32 billion / 360 million respectively, with a year-on-year increase of 2.4% / decrease of 25.7% (excluding the impact of equity incentive fees, the performance increased by 67% month on month in 2021q4). 2) In terms of profit quality, the gross profit margin decreased by 6.9pcts to 47.8% year-on-year, the sales / management expense ratio increased by + 2.9 / – 1.3pcts to 20.2% / 5.5% year-on-year, and the net profit margin decreased by 5.8pcts to 15.4% year-on-year. 3) The sales of medical business in 2022q1 decreased slightly by 2% to 1.41 billion yuan, of which: ① overseas sales decreased by 48%, mainly due to the high base brought by the delivery of some 2020q4 high price orders in 2021q1. ② Domestic sales increased by 34%, mainly due to the increased demand driven by the expansion of channels. 4) The sales of consumer goods business in 2022q1 increased by 9% to 890 million yuan, of which: ① offline stores and supermarkets grew well, and Q1 sales increased by 14% / 45% respectively. ② In online sales, the third-party platform delivery logistics has been greatly affected by the epidemic since March, with sales falling by 8%; However, the sales of self owned platforms still maintained a rapid growth of 29%.
Medical business: China has become the main market and is expected to grow healthily throughout the year. In 2021, the sales of medical business was 3.92 billion yuan, a decrease of 56% / increase of 161% respectively compared with 2020 / 2019, and the gross profit margin decreased by 14.0 PCTs to 47.5% year-on-year. The significant year-on-year decrease in sales and gross profit is mainly due to the fact that the sales price of medical protection products was at an abnormally high level in 2020, while the epidemic situation tended to stabilize and the product volume and price returned to normal in the same period in 2021, so the sales level and profit quality returned to normal.
By region, domestic / overseas sales of medical business accounted for 60% / 40% respectively in 2021 (40% / 60% in 2020). Foreign business has fallen sharply by 70% under the high base, while China has become the main market and the channel has deepened its development.
By channel: in 2021, China’s Hospital end sales increased by 12% to 1.25 billion yuan; Drugstore + e-commerce sales exceeded 1 billion yuan, an increase of about 4 times over 2019. The company strengthened the “winner” brand construction and grasped the opportunity of channel penetration. At present, it has settled in nearly 120000 pharmacies and 4000 + hospitals in China. It began to operate the official website applet at the beginning of 2022, and the number of members has exceeded 500000 at present. It is expected that the self owned “winner” brand business in China will continue to develop in the future.
In terms of products: 1) in 2021, the high-end dressing category benefited from better order demand, and the sales increased rapidly by 23% to 110 million yuan. In April 2022, the company announced that it planned to acquire Longtai medical, a leader in high-end dressings. It is expected that 2022q3 will be included in the consolidated statements to further cultivate the high-end dressings market. 2) Other categories include masks, protective clothing, operating room sensing and control products, etc. the sales showed a significant decline under the high base in 2021.
Consumer goods business: steady performance, continuous product iteration and brand building. In 2021, the sales of consumer goods business was 4.05 billion yuan, a steady increase of 15% year-on-year in 2020, and the gross profit margin decreased by 3.0pcts to 52.2% year-on-year.
By channel: the sales of e-commerce / stores / supermarkets / key customers were 25.4 / 12.3 / 2.0 / 70 million yuan respectively, with a year-on-year increase of + 9% / + 29% / + 51% / – 17% respectively. Among them: 1) the traffic of its own platforms helped the growth. In 2021, the sales of its own e-commerce platforms such as its official website and small programs reached 560 million, with a significant year-on-year increase of 45%. According to the company’s announcement, by the end of 2021, the number of users in the cotton era had reached 35 million, of which the number of private platform members exceeded 16 million (nearly 7 million store members and nearly 10 million official website and applet members). 2) Store efficiency recovered significantly, with a net expansion of 74 stores during the year. ① Number of stores: by the end of 2021, the company has 345 stores (including 23 franchise stores). We judge that the channel structure of the company will be optimized in the future; ② Store efficiency: with the weakening of the impact of the epidemic and the recovery of passenger flow, the store efficiency of the company’s Direct stores (opened for more than 12 months) increased by 25% on average, and the store efficiency of Direct stores (opened for more than 24 months) increased by 15% on average. ③ The penetration of supermarket channels has accelerated, and the number of large supermarkets and business outlets settled has been increased. The sales of supermarket channels will grow rapidly by more than 50% in 2021.
In terms of products: sanitary napkins / baby products / baby clothing / adult clothing increased rapidly in 2021, with sales increasing by 32% / 30% / 39% / 52% to 5.5/3.6/5.1/680 million yuan respectively; The performance of cotton soft towel category was stable, with a slight increase of 2% to 960 million yuan; Wet wipes and other non-woven consumer goods fell by 17% / 25% to 180 / 450 million yuan respectively, of which other non-woven products were mainly caused by the decline in mask sales. It can be seen that, compared with the previous centralized category structure, the company’s product category layout tends to be balanced, continues to deeply cultivate and subdivide the categories and bring forth the new. During the year, the company continued to launch new products such as super soft facial cleaning towel, hyaluronic acid wet compress cotton pad, pocket cotton towel, antibacterial sunscreen clothing and clothing, which are welcomed by consumers.
The cash flow returned to normal, and the company’s strategic stock increased the inventory. 1) The company’s inventory at the end of 2021 was + 31.3% to 1.6 billion yuan year-on-year, which was mainly caused by the company’s strategic goods preparation under the background of rising raw material prices. The annual turnover days of stored goods were + 47.3 days to 125.7 days, and the turnover days of accounts receivable were + 18.2 days to 36.3 days. 2) At the end of 2022q1, inventory + 23.8% to 1.64 billion yuan, inventory turnover days + 8.9 days to 120.2 days, and accounts receivable turnover days – 1.2 days to 33.1 days. 3) The net operating cash flow decreased significantly to RMB 870 million in 2021, mainly because the credit policy for medical protective products has returned to normal during the year. The net operating cash flow in 2022q1 is 400 million yuan.
2022 is expected to enter a healthy growth channel. 1) The expansion of medical business channels is effective. According to our tracking judgment, the company’s medical business has good demand in China and is expected to grow steadily throughout the year. 2) In the cotton era, the product end is diversified and new, and the traffic construction and store expansion of the channel end’s own platform continue. Although the online third-party platform sales have been greatly affected by the epidemic since March, we judge that the follow-up is expected to recover gradually. On the whole, the current high base caused by the epidemic has passed. Looking forward to 2022, the company is expected to usher in healthy growth.
Investment advice. We are optimistic about the potential for the coordinated development of medical treatment and consumption in the medium and long term. The short-term business of the company fluctuates due to changes in environmental factors. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 1.40/16.2/1.87 billion respectively, corresponding to 18 times of PE in 2022, maintaining the “buy” rating.
Risk warning: covid-19 epidemic exceeded expectations, which was unfavorable to the terminal sales of consumer goods; Market competition intensifies risks; Category expansion risk; Overseas business expansion is less than expected; Foreign exchange fluctuation risk.
