Incident: The company announced its 2021 interim report, which achieved operating revenue of 10.67 billion yuan, an increase of 139.9% over the previous year; achieved net profit of 5.88 billion yuan, an increase of 206% over the previous year; and achieved net profit of 5.85 billion yuan after deduction, an increase of 204.3% over the previous year, and EPS of 16.11 yuan.
Performance continues to grow at a high level, and profitability has improved markedly. The overall performance of 2021H1 continued to grow at a high level. 2021Q2 achieved revenue of 3.94 billion yuan, an increase of 7.2% over the previous year, and achieved net profit of 2.14 billion yuan to its mother, an increase of 19.6% over the previous year. Performance growth remained steady in the single quarter. The gross margin of 2021H1 was 70.6%, an increase of 9.5 pp over the previous year. The increase in gross margin was mainly related to the company's cost reduction and product structure improvement.
Production capacity continues to expand at an accelerated pace, and competitiveness continues to increase. Since the company went public, it has continued to expand its production capacity. The production capacity of disposable gloves increased from 7.7 billion in 2014 to 51 billion in 2021 H1, including about 24 billion PVC gloves and 27 billion nitrile gloves. It has become the world's largest manufacturer of PVC gloves and the world's largest producer of unnatural latex gloves. At present, the company's production capacity is expanding rapidly, and it will form six “Shandong-Anhui-Hunan-Jiangxi-Henan-Vietnam” disposable glove production bases. The company's total production capacity is expected to reach more than 70 billion pieces by the end of 2021, the total production capacity is expected to reach 120 billion by the first quarter of 2022, and the company's total disposable gloves production capacity will exceed 300 billion by 2025, making it the world's largest disposable gloves manufacturer.
The rehabilitation and nursing sector is advancing at an accelerated pace and is expected to contribute to incremental performance. At present, the company's Zhenjiang wheelchair production base has the capacity to produce 500,000 manual wheelchairs, 50,000 electric wheelchairs and other rehabilitation and physical therapy equipment and products per year. Meanwhile, in the first half of the year, the company and the Zhenjiang Economic and Technological Development Zone Management Committee jointly signed the “Investment Agreement for the Inke Medical Intelligent Rehabilitation Equipment Industrial Park Project” to invest in the construction of the Inke Medical Intelligent Rehabilitation Equipment Industrial Park project, with a total investment of about 308 million US dollars. At present, the company continues to accelerate progress in the field of rehabilitation and nursing, and is expected to gradually contribute to incremental performance in the future.
Profit forecasts and investment recommendations. Net profit attributable to the mother for 2021-2023 is estimated to be 9.57 billion yuan, 5.17 billion yuan and 4.36 billion yuan respectively, while EPS is 26.13 yuan, 14.10 yuan, and 11.90 yuan respectively. Corresponding to current stock price valuations is 4 times, 7 times, and 9 times, respectively. The company is an outstanding enterprise in China's disposable gloves industry. Production capacity expansion continues to accelerate and sales channels are continuously strengthened. It is expected to become the world's leading disposable glove enterprise. Long-term development is worth looking forward to, and it will maintain its “buy” rating.
Risk warning: risk of production capacity expansion falling short of expectations, risk of product price reduction, risk of worsening of the competitive pattern.
