Items:

Recently, the company released its annual report for 2017 and quarterly report for 2018.

In 2017, operating income reached 576 million yuan, up 7.98 percent over the same period last year; belonging to the parent company 73.07 million yuan, up 4.91 percent over the same period last year; and deducting 67.92 million yuan in non-net profit, an increase of 14.26 percent over the same period last year. The income per share is 0.17 yuan. 0.30 yuan (including tax) will be distributed for every 10 shares.

In the first quarter of this year, the operating income was 172 million yuan, up 51.54% over the same period last year; the net profit returned to the mother was 18.35 million yuan, up 10.56% from the same period last year; and the non-net profit was 16.72 million yuan, up 9.78% from the same period last year. EPS0.04 yuan.

Main viewpoints

1. Management update, looking forward to bringing new changes

We have noticed that the management of the company has changed greatly recently. Mr. Shen Jinzhao has become the new chairman of the company (the son of the former chairman), and Mr. Zhang Haitao, the former marketing director of the company, has once again become the vice president of Liedman, responsible for the sales work of the company. The industry is in the structural opportunities brought by graded diagnosis and treatment. at present, the company's product line is dominated by biochemical products, chemiluminescence is ready to start, and the distribution of channel business in 2017 will be of great significance at this time. On the one hand, it enhances the expectation of the improvement of the company's marketing work. On the other hand, due to the great changes in management since the company's listing, which is also the main factor in the market's criticism of the company, the younger leadership core and the return of the vice president in charge of marketing have also sent a positive signal to the market. or it indicates that there will be more positive changes in the business level of the company.

two。 Business expansion and financial structure change

In 2017, the company invested in the establishment of three diagnostic products (reagent + equipment) sales subsidiaries, Xiamen Liedman, Wuhan Liedman and Jilin Liedman, with a 51% stake in the listed company. In recent years, the integration of IVD industry channel field is obvious, production enterprises and large circulation enterprises are acquiring or investing channel assets. As the development of biochemical diagnosis is relatively mature and the characteristics of product homogenization are relatively obvious, sales capacity and channel resources have a greater impact on the business. From the development experience of companies in the same industry, extending to the lower reaches of the industrial chain usually helps production enterprises to maintain the continuous growth of self-produced reagents.

The growth rate of the company's revenue in the first quarter of 2018 is more than 50%, and the growth rate of net profit is relatively slow. We believe that first of all, Desai products have achieved a higher growth rate, but its net profit margin is low (5% net profit margin in 2017). Secondly, due to the consolidated statements of the three sales companies newly invested last year.

With the rapid growth of channel business, the company's financial structure will change greatly this year, with high growth at the revenue end, a significant year-on-year increase in self-produced products or driven by channel business, and a decline in indicators such as gross profit margin and net profit margin. There may be a relatively significant increase in net profit growth for the whole year.

3. The performance has stabilized and the product line has the potential for sustained growth.

The company's performance fell sharply in 2016, with revenue down 22% year-on-year and parent company net profit down more than 50% year-on-year. This performance is clearly not in line with the situation in the industry. We believe that the main reason for this situation is within the company, and the company's current product line has the potential for long-term sustainable growth. While the company's revenue shrank in 2016, we can see that sales expenses and management expenses still maintained a high level, and sales expenses increased by 38% compared with the same period last year, indicating that there is a big problem with the company's own sales. At the industry level, we expect the domestic biochemical diagnosis industry to maintain a year-on-year growth level of 5-10%, and the chemiluminescence industry to grow by more than 20%. At the same time, the volume of the middle and grass-roots market is more obvious. Liedman is one of the leading companies in the domestic biochemical diagnosis industry, both product performance and brand belong to the first line in China; the company's chemiluminescence products started relatively late, but the promotion of graded diagnosis and treatment still provides a huge market space and opportunities for domestic chemiluminescence enterprises. Therefore, we believe that according to the current layout of the existing product line, if combined with a strong sales system, the company has long-term sustainable development potential.

4. Chemiluminescence business is just around the corner

The company's chemiluminescence equipment CI1000/2000 has obtained the registration certificate of medical devices and nearly 40 chemiluminescence reagents, covering tumor markers, hormones, myocardial markers and infectious diseases. From the point of view of the number of varieties, and with reference to the situation of companies in the same industry, Liedman already has the basis for forming an initial sales scale, but from a category point of view, the company has not formed product characteristics and found a suitable breakthrough. Therefore, under the great expectation of the change of the company's management and the improvement of marketing, the chemiluminescence business will be the biggest factor affecting the company's investment value in 2018.

5. Investment suggestion

We estimate that the company's net profit from 2018 to 2020 is expected to be 87.95 million yuan, 107 million yuan and 132 million yuan respectively, with year-on-year growth rates of 20.37%, 21.61% and 24.36%, respectively, and the dynamic PE corresponding to the current stock price is 45 times, 36 times and 30 times respectively.

We believe that the company is currently at an important turning point, the industry is still at a high level of prosperity, the biochemical diagnosis industry can maintain a growth rate of about 10%, and the chemiluminescence industry has a growth rate of more than 20%. The update of important positions in the company's management has enhanced the expectation of future business improvement, and Liedman's layout in the channel field is relatively late compared with peer companies. However, from the current pattern, it still leaves some space for the company, and this business is expected to bring more obvious coordination to the company's original biochemical diagnosis business, so we maintain the company's "recommended" investment rating, which is worth paying attention to.

6. Risk hint

Product price reduction risk; business expansion risk; product development and marketing risk.