Main points of investment

Event

Recently, the company announced that its wholly-owned subsidiary Shenzhen Integrated Medical Technology Co., Ltd. (hereinafter referred to as "all-in-one Medical") and Harbin Jiarun Hospital Co., Ltd. (hereinafter referred to as "Jiarun Hospital") signed a "Cancer radiotherapy Center Cooperation Agreement". Cooperation in the establishment of "Cancer radiotherapy Center", the cooperation period is 15 years.

Hand in hand private third-level general hospital, cooperative tumor center is expected to reach 50 in 2018. Jiarun Hospital is a private third-class general hospital in Harbin, established in 2006, with nearly 500 employees, with more than 40 clinical departments, medical technology departments, auxiliary departments, etc., newly opened 650 beds, NCMS, urban residents' medical insurance, municipal medical insurance and provincial medical insurance and other designated medical institutions. The company cooperates with Jiarun Hospital to set up a tumor radiotherapy center, providing 12.25 million yuan worth of equipment and technical services, expert resources, market operation, etc. after deducting the cost during the cooperation period, the income distribution is 20% of Jiarun Hospital. 80% of the implementation of integrated medical care. At present, the company cooperates more than 30 cancer centers (integrated medical), with an annual outpatient volume of more than 300000. Together with the PPP project of Puyang Cancer Hospital and Jiarun Hospital project announced this year, in the next two years, the parent company of integrated medical and listed companies is expected to add a total of 10 cooperative hospitals, and it is expected that about 50 cancer centers will be operated jointly by the end of 2018. Within 5 years, the company plans to build and operate 100 tumor treatment centers and 30 holding hospitals through various ways to form an offline medical consortium covering the whole country.

It is an inevitable trend for high-end radiotherapy equipment (gamma knife) enterprises to cut into downstream services. Gamma knife is the field with the smallest gap between domestic and international products among all tumor radiotherapy equipment at present, and because the domestic large medical equipment adopts the configuration certificate policy, the state encourages and supports medical institutions to purchase domestic equipment, in terms of the quantity of gamma knife. Basically formed a domestic 4 (Maxima, Shenzhen Aowo, Integrated Medical, Shanghai Gamma Star) + foreign 1 (Swedish medical) market pattern, domestic gamma knife accounted for more than 90%.

The domestic gamma knife radiotherapy service market scale is much larger than the pure gamma knife equipment sales scale. According to the Frost&Sullivan first-line market research data, the domestic gamma knife radiotherapy service revenue reached 6.67 billion yuan in 2015, which is more than ten times the income scale of the simple sales of gamma knife equipment. International gamma knife giant Swedish Medical Keda radiotherapy medical service revenue accounts for about 40% of the company's revenue, simple instrument sales account for less than 60%, domestic Masip and other enterprises are also trying to extend to downstream medical services, high-end radiotherapy equipment (gamma knife) enterprises cut into downstream services is an inevitable trend, Zhongzhu medical strategy is far-sighted.

China-Zhuhai to build the Integration of Cancer treatment Industry

At present, the company carries on the industrial integration layout in the front end of the tumor treatment industry (drug research and development, tumor radiotherapy medical equipment), the middle end (tumor diagnosis and treatment center, tumor hospital) and the back end (tumor rehabilitation center combined with real estate). In terms of front-end tumor drug research and development, listed companies and groups are developing three first-class anti-tumor biological new drugs: recombinant recombinant human tumor necrosis factor (GMP certification phase), recombinant human endostatin adenovirus (phase III clinical) and Zhongzhu 1018 (phase II clinical and domestic preclinical phase); rapid access to high-end radiotherapy medical equipment through mergers and acquisitions of integrated medical equipment, and layout of tumor diagnosis and treatment services. The middle end cooperates with the hospital to build a tumor diagnosis and treatment center (mainly for radiotherapy), which not only drives the sales of self-produced medical devices, but also enters a broader field of tumor radiotherapy services to obtain stable cash flow. The back end is organically combined with the company's original real estate business, and on the basis of forming the national layout of tumor diagnosis and treatment centers and tumor hospitals, open up the rehabilitation treatment center after tumor radiotherapy and chemotherapy, and realize the integration of the whole industry before, during and after tumor treatment.

Profit forecast and valuation

Profit Forecast:

At present, the company's main business is divided into two parts: real estate business (original business) and medical sector (mainly integrated medical contribution). We adopt segment profit forecast and valuation.

Medical sector: the main business of integrated medical care comes from two parts of business: medical cooperation is divided into income and medical equipment sales (gamma knife, ultrasonic liver cirrhosis detector).

1. Medical cooperation is divided into 28 contracted and operating projects in 2015. the cooperation income in 2015 is about 233 million yuan (226 million yuan in 2014), the average revenue of each project is about 8 million yuan, and the net operating profit margin is about 35%. We predict that the number of contracted and operating projects in 2016-2018 will be 35-40-50, respectively, and the contributed operating income will be 28340 million yuan respectively. The contribution profit is about 0.98 pound 1.12 billion yuan.

2. Medical device sales: from 2016 to 2018, it is predicted that the sales volume of liver cirrhosis detector will be 350 / 550, with a unit price of about 380,000 yuan, contributing to sales of 1.3 pound 170 million. Gamma knife is assumed to be sold on 1-1-1, with a unit price of 6.4 million per unit. Together, the two contribute to the equipment sales income of 1.4 billion 180 million, because the liver cirrhosis detector is the company's own intellectual property product. The gross profit margin is relatively high, we predict that the net profit on sales is about 40%, and the net profit contribution is about 0.56 Universe 0.72 billion yuan.

From 2016 to 2018, we expect the revenue and net profit of all-in-one Healthcare to be RMB 42 million and RMB 250 million respectively, respectively, and the net profit will be RMB 1.58 billion and RMB 2.3 million respectively, slightly exceeding the commitment of the performance of Integrated Healthcare.

Real estate sector: the company's real estate business also includes reserve projects in places such as Zhuhai and Shenzhen, and the company's strategic transformation of tumor diagnosis and treatment services. We do not think the company will invest more resources in real estate. Considering the huge increase in house prices in Shenzhen and Zhuhai, we predict that the real estate sector business revenue from 2016 to 2018 will be 10x15 / 1.5 billion yuan. The net profit is about 1.3 PE 2.0 million yuan (with reference to the 13% net profit margin of Vanke and Poly Real Estate). In 2016-2018, we forecast that China-Zhuhai Medical revenue of 1.42 billion yuan and net profit of 2.8 pound 3.8 billion yuan, equivalent to RMB RMB per share, the current price corresponds to PE 6950max 45X.

Valuation discussion: at present, the overall PE (TTM) of the medical device (SW) industry is 69 times, while the comparable company Xinghe Biological PE (consensus forecast in 2016) is about 80 times. Considering the company's non-public offering financing of 1.3 billion yuan and future real estate to provide sufficient cash flow for the development of the medical sector, we think that it is reasonable to give the company 70 times PE in 2017. corresponding to the company's reasonable share price of 37 yuan per share, the current price has about 36% room to rise.

Risk hint

The expansion speed of tumor center is lower than expected, and there is a risk of integrated medical integration.