\u3000\u3 Guocheng Mining Co.Ltd(000688) 029 Micro-Tech (Nanjing) Co.Ltd(688029) )
Financial performance: under the disturbance of the epidemic and the geographical conflict in Europe, the performance of 2022q1 is under significant pressure
The company released the 2021 annual report and the first quarterly report of 2022. The revenue in 2021 was 1.95 billion yuan, a year-on-year increase of 46.8%; The net profit attributable to the parent company was 320 million yuan, a year-on-year increase of 24.5%; The net profit margin was 16.9%, with a year-on-year decrease of 1.56pct. In a single quarter, the revenue of 2021q4 was 560 million yuan, a year-on-year increase of 41.1%; In 2022q1, the revenue was 440 million yuan, a year-on-year increase of 12.5%. In terms of net profit in a single quarter, the net profit attributable to the parent company in 2021q4 was 76.22 million yuan, a year-on-year increase of 45.7%, and the net profit attributable to the parent company in 2022q1 was 43.37 million yuan, a year-on-year decrease of 35.1%. 2022q1 is mainly affected by the epidemic situation in China and the geographical conflict in the European market. The company’s revenue and profit are slightly lower than our expectations.
Growth ability: strong growth of core products and new business expansion may exceed expectations
In the company’s in-depth report Micro-Tech (Nanjing) Co.Ltd(688029) : “R & D + channel” makes endoscopy an international leader “, we mentioned that medical engineering cooperation, as an important strategic deployment of the company, is of great significance to maintain customer viscosity and promote the transformation and promotion of new products. According to the company’s annual report, in 2021, the company approached 195 translational medicine projects, and a total of 286 translational medicine projects abroad were in progress, with a year-on-year increase of about 144% and 138% respectively. This close and good interaction with clinical experts enables the R & D of many products of the company to grasp and solve the clinical pain points, and the competitiveness of products is obvious.
Core products: under the disturbance of the epidemic in 2021, hemostasis and closure products, as the company’s core products, still maintained a high growth, with a revenue of 890 million yuan, a year-on-year increase of 53.1%; In addition, driven by the two popular products of gold knife and titanium knife, EMR / ESD had a revenue of 260 million yuan, a year-on-year increase of 66.1%. We believe that the company’s core products still have strong market competitiveness. We look forward to 20222024, We expect that the company’s core products are expected to maintain a sustained and stable growth trend with the improvement of the penetration rate of minimally invasive surgery in China and the continuous expansion of overseas channels (in 2021, the company launched eurup plan in Europe, successively set up wholly-owned subsidiaries engaged in direct sales in the Netherlands, Britain, France and other countries, and set up wholly-owned subsidiaries supporting dealers in Japan);
New business expansion: in 2021, the company increased its business expansion of visualization products (in 2021, the company invested 153 million in R & D, accounting for 7.85% of the operating revenue, with a year-on-year increase of 0.34 PCT, a record high, of which the investment in visualization products accounted for 29.7% of the total R & D investment in 2021). Based on a good medical transformation platform, once the company’s disposable choledochoscope was listed, it opened the market with multi center clinical research. Admission rate may exceed expectations: the company’s disposable choledochoscope was approved for listing in November 2021. Before listing, it has successively carried out clinical trials in key hospitals across the country. In 2021, there may be more than 500 trial hospitals. Based on the good reputation of users, the admission rate of products may exceed the expected period. Revenue side may exceed expectations: in 2022q1, the company’s newly listed visual products achieved a sales revenue of 45.58 million yuan, accounting for about 10.3% of the total revenue in 2022q1. We expect that from 2022 to 2024, the revenue of this part is expected to reach 190 million, 380 million and 500 million yuan (accounting for about 7.2%, 11.2% and 11.6%), and the compound growth rate will reach about 63%. We believe that as other visualization products such as the company’s disposable bronchoscope and disposable visual brain irrigation system may be listed successively in 2022, the company’s visualization business layout is expected to bring new impetus to the rapid growth of performance.
Profitability: gross profit margin and net profit margin are under short-term pressure
In 2021, the gross profit margin of the company decreased by 1.85 PCT year-on-year and the net profit margin decreased by 3.14 PCT year-on-year. The Chinese market is mainly affected by the reduction of sales price (the overall average unit price of the company’s hemostasis and closure products decreased by 10.9% in 2021). The foreign market is mainly affected by the fluctuation of foreign currency exchange rate and the increase of international transportation costs caused by the epidemic. On a quarterly basis, in 2022q1, the gross profit margin of the company decreased by 4.64pct year-on-year and the net profit margin decreased by 7.15pct year-on-year, which was mainly affected by the short mass production time of visual products, which reduced the overall gross profit margin (the gross profit margin of visual products was 32.62%, and if such products were excluded, the gross profit margin decreased by 0.89% compared with the same period in 2021), We expect that with the scale effect brought by the mass production of visual products, the increase of the proportion of revenue and the gradual improvement of the impact of the epidemic, the company’s gross profit margin and net profit margin are expected to recover gradually.
Operating capacity: under the pressure of the epidemic situation, the operating capacity remains at a high level
In 2021 and 2022q1, the company’s cash flow from operating activities was 173 million yuan and – 23 million yuan respectively, with a year-on-year decrease of 25.3% and 140.8%, mainly due to the increase of material payment, patent litigation settlement payment and cash paid for employees. From the perspective of inventory, the inventory of the company in 2021 and 2022q1 increased by 68.3% and 29.4% respectively compared with the beginning of the period, reflecting the company’s increase in stock to meet the release of demand for subsequent products. From the perspective of operation capacity, under the influence of the epidemic, the company’s accounts receivable turnover rate and inventory turnover rate maintained a high level in 2021, indicating that the company’s products have strong competitiveness in terminal volume and bargaining power.
Profit forecast and valuation
Considering that the company’s income and profit in 2022q1 are slightly lower than our expectations, we lowered the company’s EPS from 2022 to 2024 to 3.41, 4.58 and 6.12 yuan / share (the original EPS from 2022 to 2023 was 3.95 and 5.52 yuan / share), and the closing price on April 25, 2022 corresponds to 29 times of PE in 2022 (21 times of PE in 2023). With reference to the valuation of comparable companies and industry status, we maintained the “overweight” rating.
Risk tips
The volatility of the impact of equity incentive on apparent performance, the risk of decline in gross profit margin, the risk that the sales of new products are less than expected, exchange risk, etc.
