Overview of events

On April 20, 2022, the company released its annual report for 2021, showing that the company realized operating income of 3.097 billion yuan in 2021, an increase of 17.07% over the same period last year, and a net profit of 291 million yuan, an increase of 43.71% over the same period last year, deducting 257 million yuan of non-return net profit, an increase of 39.23% over the same period last year.

The company issued a profit distribution plan for 2021, which intends to use undistributed profits to distribute cash dividends of RMB 2.0 for every 10 shares to all shareholders, with a total cash dividend of RMB 88.2004 million, accounting for 30.27% of the net profit of shareholders belonging to the parent company in the consolidated statement.

The growth of core business is stable, and overseas markets continue to open up. The company's core business medical device manufacturing sector achieved revenue of 3.087 billion yuan in 2021, an increase of 17.03% over the same period last year. Driven by the steady release of production capacity, the winning bid effect of collection and acquisition, and the expansion of syringe and needle demand catalyzed by the epidemic, the company's overall performance increased steadily, including 33.67% year-on-year revenue from cost needle products and 43.53% year-on-year revenue from syringe products. Revenue from intervention products increased by 45.32% over the same period last year. In addition, the company has taken the initiative to change the foreign trade sales model and strengthen the project cooperation system, not only through the establishment of overseas subsidiaries to strengthen the construction of independent brands in the European market, but also through in-depth cooperation with giants in the field of circulation in Europe and the United States. product layout overseas, the United States, Europe and other more than 50 countries and regions, overseas business revenue of 1.042 billion yuan in 2021, an increase of 24.91% over the same period last year, and overseas markets continue to expand.

The company's business quality continues to improve, and its overseas competitiveness continues to improve. In 2021, the company achieved a gross profit margin of 38.38%, slightly lower than the same period last year 0.2pct, net profit margin of 13.54%, year-on-year growth of 1.2pct, the company's profitability continues to improve. Although the proprietary export business was affected by the exchange rate, resulting in a decline in gross profit margin 0.95pct and medical equipment category (gross profit margin year-on-year-7.48pct) and special consumables category (gross profit margin year-on-year-5.09pct), thanks to product structure upgrading and automation improvement, the company's core business medical device manufacturing sector achieved a gross profit margin of 38.40% in 2021, an increase of 1.07pct over the same period last year. In addition, the company continues to expand its international business, and the optimization of product structure has brought about a gradual increase in the gross profit margin of overseas business. In 2021, the gross profit margin is 37.59%, an increase of 2.77pct over 2020, and overseas competitiveness continues to improve.

Low-cost advantage + consumer innovation helps the company to continue to grow and transform. With the help of the advantage of low cost, under the background of the normalization of medical insurance control fee and collection bidding, the company has actively participated in product bidding and infiltrated the blank market. The company's indwelling needle and functional infusion device have been successfully included in the collection catalogue. Taking the indwelling needle with low market share as an example, it is estimated that the domestic market share in 2019 is only 2.8%. With the advantage of low cost and good quality, new collection projects in central, western and North China will be won in 2021. And through the collection of supply channels to drive the overall product sales volume. In addition, in October 2021, the company was approved the first registration certificate of three types of medical devices for beauty needles in China, and started to go on the market. Under the background of promoting the compliance of medical and beauty devices across the country, the company's one-time injection beauty bag is based on the advantages of first-time registration and solid sales network to accelerate the shift. At the same time, the company increased its innovation efforts, with R & D investment of 185 million yuan in 2021, accounting for 5.98% of R & D investment, an increase in 1.22pct over the same period last year. Among them, new products such as disposable safety syringes / syringes have completed 510k registration and submission, and new products such as safe blood collection needles, safety insulin pen matching needles and safety retention needles will also be listed one after another, laying a solid foundation for product iterative upgrading.

Strengthen the construction of production capacity and further consolidate the advantage of low cost. The company plans to invest a total of 661.58 million yuan in 2022 to strengthen large-scale production capacity, involving various projects of the company group headquarters, Zhejiang, Guangdong and Shanghai companies. The construction investment projects include Shanghai plant (150 million yuan), Shandong production base and academic training center (100 million yuan), Zhuhai plant (50 million yuan), Beilun River plant (40 million yuan), Shanghai plant production equipment (66 million yuan), Zhejiang plant production equipment (46.3 million yuan) and the company's production equipment input (27.45 million yuan). Through the above fixed assets investment, it is expected to update some backward production equipment, further enhance production and operation capacity, and consolidate the company's low-cost advantage.

Investment suggestion

We estimate that in 2022-24, the company will achieve a home net profit of RMB 3.91 million, an increase of 34.2%, 24.3%, 22.7%, corresponding to an EPS of 0.89, 1.10, 1.35, and a PE valuation of 18.94, 15.23, 12.42 times for 22-24. We continue to be optimistic about the upgrading and expansion of the infusion puncture industry. As an industry leader, the company is expected to enjoy the dividend of industry expansion and upgrading by virtue of integrated industrial chain, lower cost advantages and continuous product innovation. At the same time, with the help of the industrial layout to extend the tentacles to the high-growth subdivision track, the company is expected to further consolidate its own moat and enhance the performance ceiling.

Risk hint

Risks related to industry regulation, product liability risk, exchange rate change risk, dealer management risk, product research and development risk, etc.