On 2021/11/18, British Healthcare (300677) issued an announcement stating: BNP Paribas Asset Management, Eastspring Investments Berhad, Exome Asset Management LLC, Great Eastern Life Assurance (Malaysia) Berhad, Hong Leong Assurance Berhad, Hong Leong Assurance Berhad, Janchor Partners Limited, J.P. Morgan Asset Management (Singapore) Limited, Kenanga Investors Berhad, Kumpulan Wang Persaraan Diperbadankan, Mass Ave Global Inc, Oxbow Capital Management (HK) Limited, Perpetual Investment Management Limited, RHB Asset Management Sdn. Bhd. investigated our company on November 18, 2021.
The main contents of this survey are:
Q: Capacity expansion plans
A: In the future, in addition to increasing categories, the company will also increase its production capacity overseas, such as Southeast Asia.
Q: The current supply and demand situation and price trend of gloves
A: According to industry reports, in 2019, the total global market demand for disposable gloves was about 500 billion units, and the annual growth rate of market demand before the pandemic was over 6%. Given the excellent characteristics and feel of use of disposable nitrile gloves, they will continue to replace disposable latex gloves, and the growth rate of disposable nitrile gloves will be higher than the growth rate of the industry. The current epidemic has strengthened the use of disposable gloves in many scenarios. Educating the population will also raise public hygiene awareness, settle usage habits, and procure strategic reserves by the industry and government, thus bringing about some permanent increases. A drop in glove prices is a normal phenomenon after the pandemic is over, but it will cause a huge change in the industry pattern — the concentration of the industry will increase dramatically. Furthermore, procurement models have also changed significantly compared to before the pandemic. For example, foreign governments have also been involved in the procurement and strategic storage of personal protective equipment such as disposable gloves.
Q: What distinguishes government procurement from the characteristics of pre-pandemic purchasers?
A: The government's primary consideration is supplier qualification, supply stability, product and service quality, followed by price. Once a cooperation is reached, they are basically long-term orders with a stable purchase volume; under a downward trend in industry prices, the locked price is usually higher than the market price.
Q: What government procurement contracts has the company obtained? What is the share of long-term orders in business volume?
A: There are many regulations governing medical device products in different regions. Applying for and maintaining license qualifications requires a great deal of time and effort. New entrants or competitors with insufficient strength will not have license qualifications. The company has obtained many certifications, and when products with good ESG performance are sold to the global market, they will not be limited by issues such as qualifications; furthermore, the company's products are diversified and of high quality, leading technical level, stable supply, and excellent sales team. Overseas government procurement from many countries is provided by companies on order. Long-term orders account for nearly one-third.
Q: Does the rise in coal prices have an impact on the company's costs?
A: The rapid rise in coal prices in the short term will have a certain impact on enterprises that use coal for energy, but because the company has coal inventories and recent policy regulations, coal prices have already declined, and it is expected that the long-term impact on costs will not be significant in the future.
Q: Does the power limit have an impact on the company's production?
A: Up to now, the production of the company's various glove bases has not been affected by power restrictions.
Q: What is the forecast for the industry pattern? Has small to medium production capacity been eliminated?
A: The price difference for disposable PVC gloves is limited, and it is mainly competition among domestic enterprises. After two quarters of industry reshuffle (the entire industry lost money in the third quarter), some additional disposable PVC glove production capacity has been completed. Currently, the price recovery has stabilized. Depending on the quality, sales channels, and marketing capabilities of disposable nitrile gloves, there will be a big price gap. In the early days of the epidemic, the company's order situation was limited by production capacity. Currently, the company's annualized production capacity of disposable nitrile gloves has reached about 9 times that of before the epidemic. The company will actively maintain old customers and develop and expand new customers to absorb the company's new production capacity. There were more than 100 glove manufacturers in the glove industry before the pandemic. Coupled with the new high-cost production capacity added during the pandemic to make quick money, the number will increase. After many small and medium-sized factories and old production capacity are eliminated and cleared, it is predicted that the last few leading manufacturers will cover more than 80% of the global market. As far as I know, some small and medium-sized factories are no longer profitable and facing losses. The company will seek product prices on the basis of maintaining a steady increase in market share. The first step is to participate in market price competition to accelerate industry reshuffle and eliminate backward production capacity.
Q: Does the shipping price have an impact on the company?
Answer: In terms of cargo transportation, most of the company's export products take the form of FOB and do not bear shipping costs; the company has signed long-term stable strategic cooperation agreements with leading shipping groups, which can guarantee a high level of service quality for customers.
Q: Will the company stop its expansion plans due to falling prices or the expansion of production by other manufacturers?
A: The founder and chairman of the company have more than 30 years of experience in the industry. They have experienced many changes in the industry, have a full and deep understanding of the industry, and have a very strategic vision. The industry itself has a need to expand and upgrade production capacity. The company has not only become one of the industry's technology leaders, but also laid out and responded to market changes ahead of time. For example, the production capacity that was put into operation during the pandemic was the company's planned layout before the pandemic. It's just that the outbreak of the epidemic accelerated the company's expansion and upgrade plans that originally took 8-9 years to achieve. As far as the industry is concerned, high-quality production capacity will always be scarce. The company is very confident in its cost control ability, operation ability, marketing ability, and ability to deeply integrate the industrial supply chain. The company will increase the layout of overseas bases in the later stages and continue to promote technological upgrading of production lines.
Q: What are the company's advantages over its Malaysian competitors?
Answer: The Malaysian manufacturing industry generally has the following two problems: the first is human resources: ① The average workforce: using migrant workers a lot and their working conditions and human rights situation are worrying; in particular, due to the impact of the epidemic, production, operation and production expansion have been limited; ESG performance of many enterprises has problems, and exports of some mainstream manufacturers to the US have been restricted; ② Middle and high-end talents: the reserve of highly qualified engineers, marketers, etc. in the manufacturing industry is limited, and outstanding university students and social talents are scarce, making it difficult to establish a strong R&D, marketing and management team. Second, production resources: ① Malaysian industry uses natural gas or biomass, and the cost in a steady state is much higher than that of clean coal; ② The chemical industry chain is undersupported, and the local supply of raw materials such as nitrile latex is insufficient. It mainly depends on imports. In addition to supply chain security risks, the cost of raw materials is also higher than China's. Labor shortages (including human rights issues) are a common problem faced by the Malaysian manufacturing industry, while large US customers value ESG and still have concerns when purchasing gloves.
Main business of Inke Healthcare: Inke Medical Technology Co., Ltd. is a comprehensive medical care product supplier. Its main business covers the four major sectors of medical protection, rehabilitation care, health and physical therapy, and examination consumables
According to Inke Healthcare's 2021 three-quarter report, the company's main revenue was 13.647 billion yuan, up 52.56% year on year; Guimu's net profit was 6.943 billion yuan, up 58.77% year on year; after deducting non-net profit of 6.911 billion yuan, up 58.15% year on year; among them, in the third quarter of 2021, the company's main revenue for a single quarter was 2,972 billion yuan, down 33.88% year on year; non-net profit for the single quarter was 1,064 million yuan, down 56.61% year on year; non-net profit for the single quarter was 1,061 million yuan, down 56.64% year on year; debt ratio was 23.4% , investment income of 1,7257 million yuan, financial expenses - 779.30 million yuan, gross profit margin of 65.64%.
In the last 90 days, the stock was rated by 4 institutions and bought 4 ratings; the target price of institutions in the past 90 days was 68.68; there was a net financing outflow of 420 million in the past 3 months, and the financing balance was reduced; there was a net outflow of securities lending of 4,7351 million, and the balance of securities loans decreased. According to the Securities Star valuation analysis tool, British Healthcare (300677) is rated 5 stars as a good company, a good price rating is 3 stars, and the overall valuation rating is 4 stars. (Rating range: 1 to 5 stars, maximum 5 stars)