\u3000\u3000 Shanghai Titan Scientific Co.Ltd(688133) (688133)
Significance of scientific service industry platform company
The science service industry is a typical bilateral market, with stronger scale effect acting on both the supply side and the demand side, and the diversified and standardized product characteristics of the industry products highlight the significance of the platform. From the pattern of the global science service industry, we can also see that the industry shows an obvious high convergence of leaders. The top three in the industry account for about 40%.
Platform companies have greatly improved the procurement efficiency of customers. The ability of their own products determines the barriers for customers to switch platforms. Strengthening their own products with the help of early traffic is expected to consolidate the first mover advantage. We believe that the platform company jointly built by its own products and third-party products is the final business form for the scientific service company to become bigger and stronger.
The products and customers of platform scientific service companies cover a wide range of industries, and the impact of upstream and downstream price changes and prosperity fluctuations in some fields is limited. Especially the correlation with the prosperity of CXO industry. We believe that ① biopharmaceutical customers are only one of the many industries covered by the company. Compared with the impact of China’s CXO long-term prosperity on the industry, the overall R & D investment has a stronger correlation with the prosperity of the scientific service industry; ② Currently Shanghai Titan Scientific Co.Ltd(688133) only provides services related to reagents, equipment and consumables in the early stage of R & D, and does not involve raw materials for subsequent production. ③ At present, the domestic utilization rate of equipment, instruments and high-end reagents is less than 10%. The gradual sensitivity to R & D costs and timeliness and policy support are expected to increase the local market share and improve the prosperity of the industry.
Difficulties and opportunities of local companies under the industry pattern of overseas monopoly
The industry is growing rapidly, monopolized by Europe and America, with low local concentration. The industry characteristics determine that the short-term industry pattern may be difficult to shake. ① Overseas mature brands have been established for a long time and entered the customer supply chain earlier; ② Customers have high requirements for the accuracy and reproducibility of experimental results determined by products, resulting in high product viscosity and low willingness to take the initiative to replace; ③ User feedback can strengthen iteration, grow fast and establish a brand moat; ④ The bilateral market attributes and diversified and standardized product characteristics determine the strong demand for the integrated platform and the obvious gathering of leaders; ⑤ Frequent acquisitions strengthen concentration and quickly supplement their own blank areas.
Under the background of the times, opportunities for local companies: ① some product capabilities can be comparable with those overseas, by gradually expanding customer channels and strengthening brand building; ② Driven by the epidemic situation, similar biological reagents and diagnostic products are expected to accelerate the completion of the product customer running in period with a stable supply system and relatively perfect product quality. ③ In terms of instruments and equipment, under the industry background of independent and controllable industrial chain, policies may promote the acceleration of substitution. ④ Pay attention to the development acceleration brought to the company by the acquisition of areas with certain entry barriers and high-quality production capacity.
One year after listing, the industrial chain, supply chain and service chain have been comprehensively improved
As the only scientific service company currently listed to build a relatively complete product matrix through its own brands and third-party mature brands, Shanghai Titan Scientific Co.Ltd(688133) has been listed for more than one year, focusing on gradually improving the industrial chain, supply chain and service chain from multiple perspectives such as customer development, improvement of its own product capacity, independent and controllable production capacity and service platform construction.
\u3000\u30001. Industrial chain development: analytical testing and biological reagents are the main development direction of the company at present. In addition to self-development and expansion of product categories, the company also actively improves the influence of third-party and independent brands in the field of analytical testing by cooperating with leading brands such as PE and Dr. e, acquiring Anhui Tiandi and investing in Ningbo Cuiying.
\u3000\u30002. Service chain development: the preliminary establishment of the national warehousing and distribution service system has been completed. By H1 of 2021, local warehousing and self delivery services in 17 cities have been realized, and the service scope reached the next day has been significantly improved. The mobile app was launched, and the internal information system was optimized and upgraded to further enhance the company’s advantages in informatization.
\u3000\u30003. Supply chain development: acquire Anhui Tiandi to strengthen its own high-purity reagent production capacity and controllable production. The company’s ability in the field of high-purity reagent is expected to drive its own products and enhance core barriers. Establish Heyuan phase I fund to pay attention to the scarce investment and M & A integration opportunities of “specialized and special new” targets. Optimize the financial internal control management system and pay attention to cash flow management.
Looking to the future, we will set out in an all-round way from reagent to instrument, from product to service integration
On September 11, 2021, Shanghai Titan Scientific Co.Ltd(688133) issued the fixed increase plan, which showed the company’s comprehensive journey from reagent to instrument, from product to service. The technical platform is mainly divided into: ① scientific research reagent R & D and manufacturing platform to solve the independent control of high-end biological reagent R & D and production. ② The R & D and manufacturing platform of scientific research instruments solves the independent R & D capacity of high-end instruments, improves the production capacity and complements with OEM. ③ The function assistance platform mainly assists in the analysis, detection and quality control of internal products, and does not sell to the outside world. In addition, in order to strengthen the service capacity, the company added a reserve base for scientific research materials with blank or weak import substitution ability in China and an import and export customs declaration platform for scientific research materials, accelerated the import and export process for high-end reagents and instruments, shortened the product import and export cycle and accelerated the upstream and downstream turnover of the supply chain.
Fisher’s double click under the scale effect
In the early development stage of platform companies, due to the small bilateral scale, the need to invest in high R & D, management and channel laying costs, and the relatively weak bargaining power of upstream and downstream, it presents a financial performance with low profitability and poor cash flow. However, with the increase of bilateral scale and the gradual improvement of channels and management ability, the profitability of the company is enhanced and the cash flow is gradually optimized. Thermofisher, a global leader in scientific services, confirmed this view by its main scientific research service business, Fisher’s historical financial performance before the merger. Fisher opened up the sales volume by expanding the service capacity, bringing benefits under the scale effect. According to the historical recovery and the existing scale and growth rate of China’s R & D market, we predict that Shanghai Titan Scientific Co.Ltd(688133) or when the revenue scale exceeds 5-5.5 billion yuan, there will be an obvious inflection point in the cash flow performance.
Profit forecast and valuation
Without considering the impact of Anhui Tiandi’s acquisition and consolidation on the company’s profit side for the time being, based on the unexpected performance of non recurring profit and loss in the company’s annual report, we raised the profit forecast for 2021. It is estimated that from 2021 to 2023, the net profit attributable to the parent company will be 148 million, 201 million and 290 million, corresponding to eps1.2 million 94、2.64、3.80。 Corresponding to the closing price on January 18, 2022, PE is 89 times, 65 times and 45 times respectively, Peg1 60。 Maintain the “overweight” rating with reference to the average valuation of similar companies.
Risk tips
The R & D and sales of downstream products do not meet expectations, the price of raw materials increases, exchange rate fluctuations, safety production and environmental protection, new business development do not meet expectations, the loss of core technicians, the risk of lifting the ban, and the risk of dependence on key customers.
