The impact of the epidemic has gradually been eliminated. The equity incentive plan shows development confidence. According to the company's 2021 performance forecast, net profit for 2021 is expected to be 0.97 billion yuan to 109 million yuan, an increase of 60.0% to 79.8% over the previous year. Net profit without return income is expected to be 0.86 to 98 billion yuan, an increase of 66.3% to 89.6% over the previous year.
In November 2021, restricted shares were granted to incentive recipients for the first time. The performance assessment required that the company's net profit in 2020 (60 million yuan) be used as the base, and that the growth rate of net profit (excluding equity incentive expenses) from 2021-2023 was not less than 60%/115%/179%, corresponding to net profit of 0.97/130/ 168 million yuan.
Rehabilitation business policies encourage, focus on the grassroots level, and development can be expected
1) The policy supports rehabilitation development, and national, provincial and municipal rehabilitation support policies have been introduced one after another. Rehabilitation medicine is a key part of the strategy for dealing with population aging. Population aging is compounded by increased affordability and rehabilitation awareness, demand for rehabilitation has increased, national and local rehabilitation support policies have been introduced one after another, the “Notice on Issuing Opinions on Accelerating the Development of Rehabilitation and Medical Work” has been issued at the national level, and Henan, Zhejiang, Guangdong, and Sichuan have also issued rehabilitation support policies for various provinces. 2) The rehabilitation equipment market for township health hospitals is still in its infancy, and Long Zhijie focuses on the grassroots blue ocean market. Since its establishment, Long Zhijie has actively explored the tertiary hospital market and formed a high level of brand awareness; in the future, the company will gradually sink its target market from tertiary hospitals to the county and township primary care markets. According to the China Health Statistics Yearbook, the number of township hospitals reached 35,762 in 2020. Currently, the township health hospital rehabilitation equipment market is still in its infancy. It is a blue ocean market. Long Zhijie already has successful cases in overall rehabilitation solutions for township health hospitals. In the future, it focuses on the grassroots level, and rehabilitation business development can be expected.
The overall intelligent pharmaceutical manufacturing business is stable
The pharmaceutical biointelligent manufacturing business mainly includes automated control systems, industrial software, and system equipment. The 2021H1 intelligent manufacturing business achieved revenue of 321 million yuan, an increase of 82.52% over the previous year; net profit was 269.226 million yuan, turning a loss into a profit over the same period last year. The amount of new and winning orders signed by 2021H1 was 526 million yuan, an increase of 28% over the previous year. We expect steady growth in the future.
Profit forecasting and valuation models
We expect the company's operating income from 2021-2023 to be 9.24/10.94/1,262 million yuan, an increase of 20.88%/18.44%/15.31% over the previous year. Excluding equity incentive expenses, we expect net profit to be 0.98/1.31/171 billion yuan. Referring to the PE of similar companies in 2022, considering the policy's support for rehabilitation and the company's promising grass-roots rehabilitation business development, the company was given 30 times PE, corresponding to a market value of 3.9 billion yuan. The target price was 14.42 yuan, and the company was given a “buy” rating.
Risk warning: Risk of fluctuation in the performance of the intelligent pharmaceutical manufacturing business, risk of rehabilitation equipment sales falling short of expectations, risk of repeated COVID-19, policy implementation falling short of expectations, and increased market competition.