Events:
On October 23, 2017, the company released its third-quarter 2017 report: revenue in the first three quarters of 2017 was 518 million yuan, up 25.08 percent over the same period last year; net profit was 56.06 million yuan, up 9.64 percent over the same period last year; of which, revenue from Q3 in 2017 was 195 million yuan, up 33.78 percent from the same period last year, and net profit was 17.76 million yuan, down 18.15 percent from the same period last year.
Comments:
In the third quarter of 2017, the company's hemodialysis business maintained rapid growth, while the growth rate of the monitoring business slowed:
Revenue in the first three quarters of 2017 grew 25.08%. Q3 revenue in 2017 increased by 33.78% compared with the same period last year, of which the hemodialysis business maintained a growth rate of more than 30% in the first three quarters, while Q3 achieved a high growth rate of more than 35% in the first three quarters of 2017, and the growth rate of monitoring business affected by the industry gradually slowed down.
The performance temporarily slowed down in the first three quarters of 2017 (up 9.64% from the same period last year), mainly due to the increase in research and development, sales and monitoring business growth of hemodialysis business:
In the first three quarters of 2017, the company achieved a net profit of 56.06 million yuan, an increase of 9.64% over the same period last year, and the growth rate of performance slowed down. On the one hand, the company increased its research and development and sales of hemodialysis business. Due to the increase in short-term related expenses (sales expenses accounted for about 14.42% of revenue in the first three quarters of 2017, an increase of 0.56 points over the same period) On the other hand, the growth rate of the guardianship business with high gross profit margin has slowed (the gross profit margin of the guardianship business and the hemodialysis business is about 48% and 35%, respectively), resulting in a decline in the overall gross profit margin of the company (the gross profit margin in the first three quarters of 2017 was about 38.04%. A decrease of 2.05 points compared with the same period).
Increase the proportion of hemodialysis business + effective control of management costs, continue to be optimistic about the company's high performance growth in the future:
In terms of hemodialysis business, the company has constructed the whole industry chain development model of "product manufacturing + channel construction + medical services". The revenue proportion of hemodialysis business has increased from 12.18% in 2012 to about 70% at present. The increase in the proportion of hemodialysis business will help to offset the impact of the slowdown in the growth rate of monitoring business. In terms of management expenses, the company achieves the scale effect of the business and reasonably controls the expenses, and the revenue proportion of the management expenses has dropped from 13.89% in 2012 to the current 9.26%. The effect of fee control is remarkable. Combining the two major factors of "increasing the proportion of high-growth hemodialysis business" and "effective control of management expenses", we believe that the company is expected to gradually get rid of the impact of the slowdown in the growth of the guardianship business and maintain a high growth trend in long-term performance.
Profit forecast and valuation:
According to our estimation, the EPS of the company in 17-19 is 0.59,0.77 and 1.06 yuan respectively, corresponding to 47, 36 and 26 times PE, maintaining a "highly recommended" rating.
Risk hint: the company's extension is lower than expected, the risk of national policy change, and the intensification of market competition.