Main points of investment:
Good industry: technological breakthroughs and policy support open up new growth space
Molecular diagnostics is the fastest growing sub-sector in the IVD industry. China's market size has increased from 1.65 billion in 2010 to 4.59 billion in 2014, with CAGR reaching 29.1%. We predict that the market size will exceed 10 billion in 2019; regulatory policies support the development of the industry, medical insurance control fees and second birth promote the status of molecular diagnostics; as the leader of molecular diagnostics, the company has a market share of 23.5% by the end of 2014.
Qiang company: the whole industry chain company of in vitro diagnosis industry
The company's business is divided into three parts: reagents, instruments and services, and there are more than 70 holding companies, which is the only listing platform under CUHK. In the field of biochemical immunity, the revenue in 2014 was 156 million, with a net profit of 10 million, of which Daruicheng became the core growth point, with CAGR as high as 44.7%. Although Umaike is in its infancy in the field of chemiluminescence, it has a bright future due to the development of industry trends. In the field of PCR, the related revenue reached 800 million in 2014, while the peers were less than 100 million. PCR reagents accounted for about 70% of the reagent revenue, with a growth rate of about 15%. At present, more than 60 kits have been approved by CFDA; in the billion-level space of blood screening nucleic acid testing, the company is expected to cut a larger piece of cake because of its competitive advantage in Guangdong region. In the field of independent diagnostic laboratory (ICL), the market share of high-tech Daan in 2014 was 7%. With the exception of Kunming and Taizhou ICL, all the others have reversed losses. The overall net profit of the eight major ICL at the end of 2014 was 1.1 million, which has been reversed. We believe that ICL profits will expand rapidly in 2016. According to the neutral forecast, China's market space will reach 27 billion in 2020. If the company's share remains unchanged, ICL will bring 1.86 billion revenue.
Promising: the market of trillion second generation gene sequencing is worth looking forward to.
Stimulated by the decline in policy and sequencing prices, the gene sequencing market is expected to reach 10 billion yuan in 2020, with a growth rate of more than 30%. The company has a layout in the upper and middle reaches of the industrial chain, and has been approved by the Health and Family Planning Commission in the field of prenatal screening, diagnosis and cancer diagnosis and treatment. the company is expected to take the lead in enjoying the benefits of industry growth.
New area: relying on the medical resources of CUHK, the hospital investment business is gradually realized.
CUHK has 8 direct and 10 non-directly affiliated hospitals with 7500 and 12100 beds respectively, which can complement the company. From the establishment of a medical investment management company in 2014, cooperation agreements were signed with the governments of Enyang District and Kaili City in August and December 2015, respectively. Under the circumstances of insufficient supply of medical resources in Enyang District and Kaili City, we believe that the company's medical investment business has plenty of room for development and is gradually being realized.
Steady confidence: 1.5 billion internal subscription shows confidence, while executives increase 450 million to stabilize their morale.
In October 15, the company issued a fixed increase plan to raise 1.5 billion, of which executives subscribed for 1.429 billion and others were subscribed by employee stock ownership plans. Internal full subscription shows that employees have sufficient confidence in the company's development prospects. Since November 2015, the company's chairman he Yunshao and director Cheng Gang have increased their holdings of 12.3 million shares by 446 million. Such a large increase shows that the company's executives are optimistic about the company's prospects.
Profit forecast and valuation: we estimate that the company's EPS for 15-17 years is 0.260.31 EPS 0.38 yuan, the target price is 39 yuan, corresponding to PE is 114-95-78 times, giving a "highly recommended" rating.
Risk tips: independent laboratory profits, medical investment business is not as expected, the increase is not smooth, and so on.