Event

Recently, the company released a pre-increase announcement for the 2017 semi-annual report, and the company expects to achieve a net profit of between 35.3059 million yuan and 42.6613 million yuan, up 20% to 45% from the same period last year.

The company is in good operating condition and its performance continues to grow at a high level.

The company's 2017Q1 realized a net profit of 17.11 million yuan, an increase of 21.34% over the same period last year. It is estimated that the company's Q2 realized a net profit of 18.1959 million yuan to 25.5513 million yuan, an increase of 18.77%, 66.78% and 6.35%, respectively, compared with the previous year. Since its listing in 2011, the company's operating income has grown at a compound annual rate of 34.4%, and its performance has maintained rapid growth. In 2016, the company's total operating income was 594 million yuan and its net profit was 67.14 million yuan, an increase of 56.19% and 180.71% respectively over the same period last year. In the first half of 2017, the company's performance continued to grow steadily on the basis of a high base in 2016, mainly due to the gradual improvement of the company's industrial layout and good operating conditions.

The layout of the whole industrial chain of hemodialysis business continues to improve, and the integration benefits gradually show that the company is doing horizontal expansion of the industrial chain around the hemodialysis business plate. In terms of hemodialysis products, upstream device products have completed the registration of dialysis pipes and needles, and have obtained registration certificates for three types of medical devices, and continue to expand the promotion and use of hemodialysis machine D30 in various hospitals. has been accelerating the development of high-end hemodialysis equipment (machine). In addition, acquire the remaining 49% equity of Shenbao Medical and 10% of Baorui Medical, further improve the domestic layout of hemodialysis equipment, in addition, the company has invested in setting up a German subsidiary to actively strengthen channel construction and open up foreign markets.

In terms of downstream consumables, considering the transportation radius of consumables such as dialysis powder and dialysate (about 800 km), the company deployed the national market through epitaxial acquisition and self-built hemodialysis consumables production base, raised funds to build hemodialysis consumables industrialization construction bases in Nanchang and Tianjin, extended acquisition of 60% equity of Changzhou Huayue, 40% of Tianjin Zhixin Hongda, and increased capital acquisition of Wuhan Credi to 62.08% equity. Quickly cut into the market of hemodialysis consumables in North, East and Central China.

In terms of terminal hemodialysis services, through equipment trusteeship, service sharing, co-construction of departments and mergers and acquisitions of hospitals, we intervened in hemodialysis medical services and acquired Tsing Yuan Kanghua Hospital and Tongtai Hospital one after another. From products to terminal services, the company's hemodialysis business layout of the whole industry, the construction of hemodialysis industry chain closed loop, integration benefits gradually appear.

Profit and valuation

We forecast that from 2017 to 2019, the operating income of the company will be 813xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

The overall price-to-earnings ratio of the medical device industry is about 52 times, and PE (TTM) has fluctuated more than 130 times in the past three years. Valuations have fallen significantly as earnings have improved since 2016, and the share price is now trading at 52.7 times static earnings in 2016, close to the industry average. The whole industry chain layout of the company's hemodialysis business has entered the harvest period, and with reference to the current 52XPE (TTM) valuation of Jianfan Biology, which is the main business of blood purification equipment, we conservatively give the company a valuation of 50 times earnings in 2017, with a target price of 35 yuan in the next 12 months, maintaining a "buy rating".

Risk hint

1, the competition of hemodialysis business is intensified; 2, the market development of major equipment products is not as expected; 3, the development and registration of new products are not up to expectations.