Focus on the mass spectrometer independent research and development of domestic "specialized special new" little giant. The company is a national torch plan key high-tech enterprise integrating mass spectrometer research and development, production, sales and technical services, mainly providing mass spectrometer and related technical services to customers. The company announced that it has taken the lead in undertaking or participating in national major scientific research projects for many times, including the national major scientific instruments and equipment development project, the national high-tech research and development (863) plan, the national key research and development plan, and the strategic pilot science and technology project of the Chinese Academy of Sciences, etc., the company was selected into the first batch of specialized new "Little Giant" enterprises of the Ministry of Industry and Information Technology in 2019. From 2014 to 2020, the company's revenue increased by 7.2 times (CAGR=42.0%), and its homed net profit increased by 5.9 times from 2015 to 2020 (CAGR=47.2%). Among the two main businesses of the company, environmental monitoring instruments account for 66.2% and technical services account for 33.8%.

Mass spectrometry analysis, high-end quantitative detection analysis, widely used in environmental medicine, food and industrial process analysis, domestic import dependence of 74%. Mass spectrometer has been developed for nearly a hundred years since the 1920s. Mass spectrometry, as a key common technology in the industry, is widely used in many industries or fields. it has a broad market prospect in the fields of environmental monitoring, medical and health, food safety, industrial process analysis and so on. At present, environmental monitoring is mainly used in the field of PM2.5 and VOCs source analysis and treatment. Medical treatment is mainly used in clinical testing, including microbiological identification, neonatal screening and vitamin detection. Food safety mass spectrometer is widely used in quality and hygiene items testing. According to Zhi Research, the market size of mass spectrometers in China is about 14.22 billion yuan in 2015, accounting for about 30% of the global market (20.2% of CAGR ≈ in 2020-2020). According to the data of the General Administration of Customs, China's imported mass spectrometers increased from 4.47 billion yuan to 10.52 billion yuan (CAGR ≈ 15.3%) from 2014 to 2020, and the import dependence decreased from 94.7% in 2014 to 74.0% in 2020. From the perspective of equipment-importing countries, the United States, Germany, Singapore and Japan are among the top countries in the number of imported mass spectrometers.

The company environmental monitoring mass production, medical and food industry process analysis product line in full bloom. The company's product line layout involves environmental, medical, food and industrial process analysis. At present, the products that have been industrially applied are SPAMS, SPIMS and AC-GCMS-1000 in the field of environmental monitoring, all of which are used in the field of environmental monitoring (as of 2018, Wexin's PM2.5 source analysis business covers 31 provincial administrative regions, services cover 152cities, and VOCs voyage monitoring and evaluation business has been completed in 18 provinces and 170cities). DT-100, GGT-0620 and CMI-1600 (fully automatic microbiological detection mass spectrometer) are in the stage of market expansion. In medical field, triple quadrupole mass spectrometer (for neonatal screening) and nucleic acid detection mass spectrometer are in the stage of research and development, while in food field, atmospheric pressure ionization time-of-flight mass spectrometer (API-TOF) and thermal-assisted plasma ionization time-of-flight mass spectrometer (TAPI-TOF-1000) are in the stage of research and development, which are mainly used for agricultural and veterinary drug residues and additive analysis. Industrial process analysis has laser resonance ionization time-of-flight mass spectrometer (LRI-TOF MS-2200) is currently in the stage of research and development.

The proportion of operation and maintenance has gradually increased, and the stability of business has been gradually enhanced. From the perspective of business model, the company's business can be divided into analytical instrument sales and technical services. Among them, the proportion of sales income of analytical instruments in total revenue decreased to 66.2% from 77.3% in 2018, while the proportion of technical services in revenue increased to 33.8%. This is mainly due to the rapid increase in the proportion of data analysis in revenue and the enhancement of business stability. The main reasons: ① benefits from the favorable impact of environmental protection policies and the company developed timely data analysis methods to meet the market demand. The demand of downstream customers for corporate data analysis services is growing rapidly. ② as the number of instruments sold by the company increases year by year, the demand for technical operation and maintenance also increases.

The split shows that in 2020, the company only provided equipment accounted for 28.1% of the revenue, while the provision of equipment + technical services accounted for 51.3% of the business type, and only provided technical services accounted for 20.5%.

Investment suggestion: the company's net profit from 2021 to 2022 is expected to be 97 million yuan and 128 million yuan, corresponding to 1.39 yuan and 1.83 yuan respectively for EPS. Given the buy-A rating, the 12-month target price is 109.80 yuan, which is equivalent to 60 times the dynamic price-earnings ratio in 2022.

Risk Tips:

1) the progress of the product line is lower than expected risk: the company's current products are mainly flight time, and the follow-up company will launch triple quadrupole products, which belong to the new product series. There is a big difference between the technical principle and the flight time. There may be a risk of slow progress, or an uncontrollable risk to the follow-up company's profit forecast. 2) the risk that the progress of customer development is lower than expected: the company currently focuses on environmental monitoring equipment and generally adopts bidding, and the customers are mainly the government, but the downstream customers of the company's follow-up new products are mainly hospitals, food testing companies, industrial enterprises, and so on. The requirements for the company's channel capacity have been greatly improved, and there may be a risk that the weak channel construction of the company will hinder the sales of new products and thus affect the sales growth rate of the company. 3) the risk of a sharp decline in prices after the product has entered the mature stage; 4) the risk that the company is facing excessive pressure from international competition that the progress of replacing overseas products is lower than expected.