Shortage of medical resources, shortage of local finance, promotion of industrial policies, long-term strong demand for medical construction and PPP projects:
Among the 28000 hospitals in China, more than half of them have been in use for more than 25 years, and the demand for reconstruction, expansion and new construction has been strong for a long time. However, the growth rate of government revenue has dropped from a high of nearly 30% in 2011 to less than 10% in 2015. The contradiction between revenue and expenditure is so prominent that it is difficult to afford a huge investment in medical construction. In order to alleviate the pressure of fiscal revenue and expenditure, the government continues to issue a series of industrial policies to promote the development of PPP projects, introducing social capital to participate in the investment, financing and construction of public projects. Combined with the three dimensions of "medical resources", "local finance" and "industrial policy", we believe that under the current situation of shortage of medical resources and tight local finance, the long-term demand for hospital construction is strong, and the hospital PPP project is expected to develop rapidly under the support of industrial policy.
The medical construction model of buyer's credit helps the company to "pry large orders with small funds". 4.872 billion of the credit construction contracts have been signed, and project revenue is expected to be gradually recognized in recent years, contributing to high performance growth:
The company provides buyer's credit line and loan guarantee for comprehensive public hospitals. Bank loans are specially used for hospitals with good operating conditions and lack of funds to purchase Shangrong Medical products or services (including hospital construction, medical engineering, equipment, etc.). Buyer credit helps the company to pry large orders with small funds. At present, the actual guarantee balance of the company is 648 million yuan, accounting for 35.66% of the net assets. The proportion of the actual guarantee balance in the past three years is relatively stable, and the guarantee objects are operating normally, and the potential risk of the company to assume guarantee liability is relatively small. At present, the company has signed a credit construction contract of 4.872 billion yuan, most of which are in the stage of construction or preparation before construction. The recent project revenue is expected to be gradually recognized, which will help the company's high performance growth.
Shang Rong created the PPP model "Medical Construction + leveraged financing + BOO Operation" to build a hospital management brand with considerable long-term growth:
The company's PPP model takes the overall construction of the hospital as a starting point to help local governments invest and finance the construction of hospitals, so as to achieve control over hospitals, involve hospital management business, and obtain sustained income through medicine and equipment supply and distribution, logistics trusteeship, collection of management fees, and so on. At present, there are 7 PPP projects with a total investment of 4.25 billion yuan. The company aims to obtain the management rights of 30 public hospitals within 3-5 years to form its own hospital management brand.
According to the estimation that the income scale of 30 hospitals is more than 10 billion (estimated that each hospital is more than 300 million on average), the net profit margin is 15%, and the management cost is 5-8%, the company has business expansion space of 2 billion yuan in consumable materials distribution business; in hospital management business, 30 hospitals are expected to contribute more than 100 million yuan in profits every year.
Layout of equipment consumables production and marketing business, reasonable extension of the industrial chain, rapid expansion of medical consumables business, effective coordination with hospital management:
The company combines the advantages of the main business of medical professional engineering, reasonably extends the industrial chain downstream, and distributes the production and marketing business of equipment consumables through acquisition. Among them, the main equipment consumables production and marketing layout includes the acquisition of Poulder Medical (55% equity) and Jinzhou Medical (66.21% equity). At present, the operating income of the medical consumable materials production and marketing business has increased from 135 million yuan in 2013 to 1.023 billion yuan in 2016.
Profit forecast and valuation:
According to the company's existing business situation, we estimate that the EPS of the company in 17-19 is 0.26,0.32,0.39 yuan respectively, corresponding to 38,31,25 times PE, giving a "highly recommended" rating.
Risk tips: order confirmation is not up to expectations, accounts receivable payback risk, buyer credit risk, etc.
