\u3000\u3 Guocheng Mining Co.Ltd(000688) 029 Micro-Tech (Nanjing) Co.Ltd(688029) )
Event: on April 26, 2022, the company released the annual report of 2021 and the first quarterly report of 2022. In terms of performance,
1) the performance of the annual report is in line with the expectation: the operating revenue is 1.947 billion yuan (+ 46.77%), the net profit attributable to the parent company is 325 million yuan (+ 24.54%), if the influence of share based payment and income tax is excluded, the net profit attributable to the parent company is 393 million yuan (+ 46.29%), the non net profit attributable to the parent company is 276 million yuan (+ 29.71%), and the cash flow from operating activities is – 173 million yuan (- 25.25%).
2) the growth rate of the first quarterly report fell: in 2022q1, the company achieved a revenue of 443 million yuan (+ 12.50%), and a net profit attributable to the parent company of 43 million yuan (- 35.12%). Without considering the impact of share based payment, the net profit attributable to the parent company was 61 million yuan (- 32.81%), deducting the net profit not attributable to the parent company of 43 million yuan (- 31.82%), and the cash flow from operating activities was – 23 million yuan (- 140.76%). Cash flow decreased by 81 million yuan compared with the same period of last year, mainly due to the increase in salary paid for employees and purchase of goods.
Repeated outbreaks in 2021, the performance is still bright and shows resilience. In 2021, the epidemic situation was stable, the hospital outpatient treatment and surgery were carried out in an orderly manner, the company accelerated the expansion of channel network, and the business recovered rapidly. 1) Quarter by quarter, Q1-Q4 revenue was RMB 394 / 4.81 / 514 / 558 million respectively, with a year-on-year increase of 60.16/48.5/58.64/41.27% respectively. In the fourth quarter, the net profit attributable to the parent company was 76 million yuan (+ 45.65%), the net profit not attributable to the parent company was 68 million yuan (+ 33.24%), and the cash flow from operating activities was – 04 million yuan (- 96.47%). The decrease in cash flow from operating activities was mainly due to the increase in materials paid by the company, settlement of patent litigation and cash paid for employees. 2) In terms of regions, both China and abroad have recovered rapidly. In 2021, China’s revenue was about 1.200 billion yuan (+ 48.05%); The international revenue is about 742 million yuan (+ 44.53%). The revenue in the Americas was 300 million yuan (+ 50%), that in Europe, the Middle East and Africa was 296 million yuan (+ 34.55%), with a record growth rate. The overseas revenue in the Asia Pacific was 80 million yuan (+ 80%), and that in Latin America and Canada increased by 133% year-on-year. 3) In terms of operation, the gross profit margin is under pressure in the short term. China’s gross profit margin is 65.87% (- 0.67%), which is due to the reduction of product price and the reduction of China’s gross profit margin. Foreign gross profit margin is 61.82% (- 3.14%), which is due to the reduction of exchange rate fluctuations and the growth of international transportation costs.
22q1 supply chain disturbance, epidemic situation and geographical conflict affect performance. 22q1 performance is affected by the geographical conflict between the Chinese epidemic and overseas European markets, and the supply chain outside China is under pressure. In terms of regions, 1) China’s epidemic suppression endoscopic diagnosis and treatment, and the promotion of new visual products were smooth: 22q1 China’s revenue was 276 million yuan (+ 21.77%); The Chinese market is affected by the epidemic, and endoscopic surgery and routine examination are subject to certain restrictions. The increase in China’s revenue is mainly due to the revenue of the company’s newly listed visualization products of 46 million yuan. 2) Overseas was affected by the geographical conflict in Europe: the overseas revenue was 166 million yuan, flat year-on-year, of which the European revenue decreased by 13.86% compared with the same period of last year. Due to the geographical conflict in the European market, the company switched some OEM business to direct sales mode and is still in the transition period, the American market increased by 30.29% compared with the same period of last year.
The revenue of endoscope series products increased rapidly, and the performance of EMR / ESD, microwave ablation needle, hemostasis and closure products increased significantly. The company’s main businesses are hemostasis and closure, biopsy, expansion, ERCP, EMR / ESD, EUS / EBUS, microwave ablation needle and tumor ablation equipment, with revenue of 892 / 2.37/1.85/1.28/2.60/0.18/1.26/51 million yuan respectively, up from 53.10/33.74/16.13/28.70/66.13/48.47/58.87/5.49pp. Microwave ablation needles and a variety of endoscopic consumables reached a record high, with about 11.77 million tissue clips and 14.57 million biopsy forceps sold. In terms of sales volume of ESD products and hemostatic devices, the sales volume of ESD products increased by RMB 1.8 billion, and the sales revenue of ESD products and hemostatic devices in China exceeded RMB 1.8 billion, with a breakthrough of RMB 1.2 million; 3) Microwave ablation needle: the sales volume of microwave ablation needle reaches 65000, and the production and sales ratio of microwave ablation needle products is more than 90%.
Overseas patent settlement was organized, disposable choledochoscopy was listed, and new progress was made in the registration of multiple products. In 2021, R & D investment was increased, with R & D expenses of 153 million yuan (+ 53.4%), R & D expense rate of 7.85% and R & D personnel of 403 people (23.24%). The subsidiary was rated as a national specialized new “little giant” enterprise. 152 overseas certificates involving 23 countries and regions were newly obtained. Among them, the core products sureclip and lockado hemostatic clip obtained the CE certificate under MDR. A total of 73 patents (6 invention patents) were obtained in 21 years, and a variety of products were registered and listed. In terms of products, 1) endoscopic diagnosis and treatment: the company has reached a settlement and patent license agreement with Boston science for nearly three years; Disposable bronchoscope has been submitted to FDA, CE and China for registration at the same time; The research and development of series hemostatic closure products such as three arm clamp, cobalt chromium alloy clamp, closure clamp and traction clamp progressed smoothly during the reporting period. It is expected to be listed in China, Japan and the United States in 22 years; The wonderful hand cap (disposable endoscope tip cap) has obtained the registration certificate of China and the European Union and is listed for sale; The hair clip is registered in China, and the EUS flex needle has been approved by FDA. 2) Microwave ablation: completed the design and development of the upgraded version of 3D image processing software, and has obtained the EU listing license. 3) Eoct: eoct has obtained nmpa registration, and the automatic labeling function of esophageal abnormal image features is under development. This function will be integrated into the existing eoct imaging software. 4) Disposable endoscope: the company’s disposable choledochoscope has obtained the Chinese registration certificate. The supporting consumables for choledochoscope are under research and are planned to be approved successively in 22 years.
The leader of endoscopic diagnosis and treatment equipment is driven by two wheels in China and abroad, and disposable choledochoscope is expected to open the third growth curve Micro-Tech (Nanjing) Co.Ltd(688029) is the leader of endoscopic diagnosis and treatment in China. It is expected to benefit from the expansion of tumor early screening market and the internationalization of endoscopic diagnosis and treatment consumables. The company has the potential to become an international endoscopic diagnosis and treatment giant. From the perspective of growth factors, 1) China’s market expansion: all kinds of digestive tract cancers in China are characterized by high incidence. Endoscopic early screening of tumors is the gold standard for digestive tumors. It is expected that with the popularization of early screening of tumors in China, the demand for endoscopic diagnosis and treatment will increase rapidly. 2) International expansion: as a domestic leader in endoscopic diagnosis and treatment, the company has complete products. Harmony clip is a market star and will fully benefit from market expansion. The company’s products in overseas markets have cost-effective advantages. After solving the patent dispute, the company is expected to realize the rapid expansion of overseas endoscopic diagnosis and treatment devices. 3) Innovation + M & A opens the third growth curve: a variety of core products are listed, ESD / EMR products gold knife and titanium knife are in the stage of rapid growth, eoct and disposable choledochoscope are listed, and the market space is large. In addition, the company’s international layout is conducive to global mergers and acquisitions. The company will take advantage of the respective advantages of the U.S. subsidiary, the investment department and the Department of translational medicine to introduce, invest and incubate new projects to lay the foundation for long-term growth.
Profit forecast and investment rating: we expect the company’s revenue from 2022 to 2024 to be RMB 2.285/3.40/4.012 billion respectively, 17.40/33.00/32.00% year-on-year respectively. The net profit attributable to the parent company was RMB 455 / 627 / 860 million respectively, with a year-on-year increase of 40.13/37.80/37.19% respectively. EPS is 3.40/4.69/6.43 yuan respectively, and the corresponding PE is 28.83/20.92/15.25 times respectively. It is covered for the first time and given the investment rating of “buy”.
Risk tip: the impact of the epidemic exceeded expectations, the rate of medical insurance fee control and product price reduction exceeded expectations, and the promotion progress of new products was less than expected.
