Main points of investment
Canaan Science and Technology is a leading enterprise in the production and sales of solid preparation equipment in China. In 2013, the operating income was 154 million yuan, of which the pharmaceutical machine sales and gross profit accounted for 78% and 77% respectively, which is the main source of the company's performance. From 2011 to 2013, the company's share of pharmaceutical machine sales increased from 68% to 78%, and gross profit increased from 75% to 77%, becoming the main business driving the company's performance growth.
China's pharmaceutical equipment industry is in the early stage of development, the industry has maintained a rapid growth of more than 20%, but the concentration needs to be improved. 1) the new capacity and expansion capacity of the pharmaceutical industry drives the investment in new equipment to maintain the rapid growth of CAGR24.3%. Factors such as the upgrading of medical consumption, the promotion of medical reform, the new rural cooperative medical system and the increase in investment in health insurance have not only driven the upgrading of the production capacity of the domestic pharmaceutical industry, but also promoted the growth of investment in fixed assets of the industry. According to the National Bureau of Statistics, investment in new construction and expansion of China's pharmaceutical industry maintained a rapid growth of more than 25% in 2004-12 and more than 30% in 2009-12. Equipment procurement also maintained a rapid growth of 24.3% in 2004-12. 2) short-term driver: new version of GMP certification. As of October 2013, 778 non-sterile drug manufacturers have passed the new GMP certification, accounting for only 20% of all non-aseptic pharmaceutical enterprises. With the 2015 deadline approaching, the integration of the pharmaceutical industry will be significantly accelerated. This policy will drive the downstream preparation industry to carry out large-scale reconstruction and expansion activities, thus driving the upstream equipment industry to maintain its high demeanor. In this context, we believe that pharmaceutical equipment enterprises with full-line equipment supply capacity, rich customer resources and certain economies of scale will give priority to sharing the rapid growth of the industry.
Differentiated sales strategy + broad customer base + whole-line equipment provision to create core competitiveness. 1) differentiated sales strategy: at present, domestic and foreign sales of Canaan Technology account for 4:1. According to the differences in the environment of domestic and foreign markets and the different development stages of the downstream pharmaceutical industry, the company has adopted a differentiated competitive strategy. And established a good brand image and market position. 2) extensive customer base accumulates economies of scale: in 2014, the top 500 companies in the world covered 10 pharmaceutical groups and 141 A-share pharmaceutical companies, of which 66 were covered. 3) whole-line equipment supply: the company is one of the few companies in China that can provide solid preparation whole-line equipment, which constantly enriches the product line based on granulation equipment.
Fund-raising projects: production expansion, research and development, marketing. The total investment of the company's issuance and fund-raising project is 243.5 million yuan, of which the pharmaceutical equipment industrialization base project (phase I) invests 149 million yuan, the R & D center construction invests 55.23 million yuan, and the marketing and service network construction project invests 18.81 million yuan. Main business related working capital project investment.
Profit forecast: we forecast that the company's operating income from 2014 to 2016 will be 170 million yuan, 186 million yuan and 205 million yuan respectively, an increase of 10.2%, 9.6% and 10.3% respectively over the same period last year. The net profit attributed to the parent company is 38.61 million yuan, 44.74 million yuan and 48.92 million yuan respectively, up 11.2%, 15.9% and 9.3% respectively. The corresponding diluted EPS is 0.72,0.84,0.92 yuan. According to the average PE level of A-share listed companies in pharmaceutical circulation, that is, 42 × 14 PEP 24 × 15PE, considering the growth level of the company and the current industry status of the company, we think that the reasonable valuation range of the company in 2015 is 20-25 times, corresponding to the reasonable target price range of 16.8-2.1 billion yuan.
Calculation of the issue price: according to the upper limit of the funds raised and shares issued by the company, we have calculated the issue price of the company, and the expected offering price is 13.6 yuan.
Risk hint: the risk of performance fluctuation caused by order model, the risk of performance fluctuation caused by GMP certification, the risk of customer churn caused by poor customer response caused by capacity restrictions, and patent risk.