Event: the company released its 2016 semi-annual report. From January to June 2016, the company achieved an operating income of 789 million yuan, an increase of 25.81% over the same period last year, and a net profit of 64.27 million yuan, an increase of 6.64% over the same period last year.
Revenue from service products increased significantly, and expenses were well controlled during the period: from January to June 2016, the revenue from reagent products was 311 million, accounting for 39.49% (39.89% in the same period last year), up 24.62% from the same period last year. The income from instrument products was 114 million yuan, accounting for 14.46% (27.81% in the same period last year), down 34.52% from the same period last year. Service revenue was 345 million yuan, accounting for 43.76% (compared with 30.89% in the same period last year), up 78.37% from the same period last year. The company's service revenue has increased significantly, mainly because the testing business of the company's independent medical laboratory began to contribute to the company's performance. From the perspective of expense rate, the company's sales expense rate, management expense rate and financial expense rate from January to June 2016 are 16.56% (+ 0.37PCT), 16.04% (+ 0.13PCT) and 1.79% (+ 0.46PCT), respectively.
Location accurate medical treatment, layout gene diagnosis: in November 2014, the company's fetal chromosome aneuploid trisomy 21, 18 trisomy and 13 trisomy detection kits (semiconductor sequencing method) and gene sequencer obtained the medical device registration certificate. It is a rare manufacturer in China to obtain the registration of second-generation sequencing instruments and reagents. This product is mainly used for non-invasive prenatal screening. At present, the development of gene sequencing market in China is still immature, but personalized gene diagnosis is a major development aspect of molecular diagnosis in the future. We think that the company is the first to enter the domestic blue ocean market of gene diagnosis. There is a lot of room for development in the future. Taking the lead in developing independent medical laboratories has contributed to the company's performance: the customers of the company's independent laboratories are mainly hospitals below the second grade. at present, there are eight in vitro diagnostic laboratories, including Guangzhou, Chengdu, Shanghai, Hefei, Nanchang, Kunming, Taizhou and Jinan. In the first half of 2016, the operating income of the independent medical laboratory increased by 50.41% over the same period last year, and the operation of each laboratory has been continuously improved. It is expected to further contribute to the company's profits. Get involved in hospital investment and further improve the industrial chain: in April 2014, the company and CUHK Holdings jointly invested in the establishment of Sun Yat-sen University Hospital Investment Management Group Co., Ltd., and began to dabble in hospital investment. In August 2015, the company signed the Cooperation Framework Agreement with the people's Government of Enyang District, Bazhong City, and the two sides planned to jointly fund the establishment of the Project Management Company of Enyang District people's Hospital, Bazhong City. responsible for the construction project of Enyang District people's Hospital in Bazhong City.
In December 2015, the company signed a hospital project contract with the people's Government of Kaili City, Guizhou Province, and established a project management company to build the project of Grade 3A General Hospital in Kaili City. The layout of hospitals is an important measure of the company's development strategy of the whole industry chain. In the future, the company tends to invest in public hospitals and go further into the field of medical services.
Investment suggestion: we forecast that the company's earnings per share from 2016 to 2018 will be 0.18 yuan, 0.22 yuan and 0.31 yuan respectively. The six-month target price is 28.8 yuan, equivalent to 160 times the dynamic price-to-earnings ratio of 2016.
Risk hints: policy risks, increased competition in the industry, product research and development not up to expectations