Kandelai Medical equipment is a manufacturer of intracardiac interventional devices owned by 603987 SH. Its main products are intracardiac intervention, orthopedic intervention and peripheral intervention for cardiovascular intervention. According to Frost Sullivan, the company ranked first among the domestic brands in the Chinese PCI support device market in 2018, ranked seventh among all brands with a market share of 3.1%, and ranked second among the domestic brands in the Chinese percutaneous coronary intervention device market, ranking 10th among all brands with a market share of 1.8%. At present, the company has 62 registered patents, 75 patents under application and 5 registered software. it has obtained 15 SFDA registration certificates for Class III medical devices and 12 Shanghai FDA registration certificates for Class II medical devices. The company has 235 Chinese distributors, covering customers in 21 provinces, 4 municipalities and 2 autonomous regions in China, and 32 overseas distributors covering customers in more than 24 countries and regions.
Sino-Thai point of view:
The scale of China's PCI device market will grow rapidly in the future: according to Frost Sullivan, due to factors such as an aging population, an increase in the number of patients with coronary heart disease and the increasing availability of qualified medical institutions, the number of PCI operations in China is expected to reach 1.8 million in 2023, with a compound annual growth rate of 14.0%. The Chinese government strongly supports the innovation of medical devices, especially by encouraging domestic innovative medical devices by speeding up the approval and registration process. Chinese PCI device manufacturers will introduce more PCI devices as an economic option to benefit Chinese patients. It is expected that China's PCI device market will expand rapidly, and the growth momentum will narrow the gap in the number of PCI operations between China and other developed countries.
Operating results: the company realized operating income of 110 million yuan, 140 million yuan, 200 million yuan and 90 million yuan respectively for the fiscal year 2016-2018 and the year ended April 30, 2019. The steady increase was due to the increase in sales due to the increase in the number of PCI operations. The company mainly adopts the sales model to distributors, medical device manufacturers and their customers, of which the proportion of sales to distributors is gradually increasing, accounting for about 52.8% in the first four months of 19 years. Sales to Chinese distributors generated 31.0%, 32.8%, 41.4% and 42.8%, respectively, while sales to overseas distributors generated 18.9%, 14.2%, 11.4% and 9.9%, respectively. The gross profit margin was 55.4%, 56.6%, 58.3% and 62.1%, respectively. The gross profit margin continued to rise due to the increase in the proportion of sales of interventional medical devices from 76.5% to 91.1%. The gross profit margin of central vascular medical equipment is about 65%, and that of orthopaedics is about 80%. The net interest rate was 31.9%, 29.6%, 28.7% and 36.0% respectively, which was due to the continuous increase in administrative and R & D expenses.
Valuation: based on 160 million shares after the global public offering, the company's market capitalization is HK $3.22-3.33 billion, which is lower than that of its Hong Kong counterparts. In 18 years, the price-to-earnings ratio of the company is about 48.5-50.2 times, which is higher than the industry average; the price-to-book ratio is about 2.85-2.88 times, which is lower than the industry average. In terms of profitability, the 18-year ROE and ROA were 30.55% and 24.16% respectively, higher than the industry average. Cornerstone introduced OrbiMed, a private equity fund focused on health care investment, to subscribe for US $30 million. This year, OrbiMed invested in three health care companies, Jinxin Reproduction (1951 HK), Hansoh Pharmaceutical Group (3692 HK) and CANSINOBIO (6185 HK), and their shares all performed well on their first day. Taking into account the company's industry status, performance and valuation, we give it 69 points, rated as "purchase".
Risk hints: (1) market competition risk, (2) company income mainly depends on intervention in medical device sales, (3) the impact of government medical reform price control.
