Overview of events
The company recently released its three-quarter report in 2019, with operating income of 661 million yuan in the first three quarters, an increase of 37.54% over the same period last year, and a net profit of 104 million yuan, an increase of 29.8% EPS0.41 yuan over the same period last year. Among them, the operating income of Q3 and the net profit of returning home were 265 million yuan and 44 million yuan respectively, up 54.44% and 64.49% respectively over the same period last year.
Analysis and judgment:
The performance inflection point has already appeared and will enter a period of rapid growth.
In 2015, the company began to focus on the dual main business development platform of "consumer specialty chemicals" and "health care services". The rapid growth in the first three quarters was mainly due to the consolidation of BV Company in the United States at the end of June 2019. Q3 contributed a profit of about 29 million yuan, while the dual main business also maintained steady growth. The company's H1 return net profit growth rate in 2018 and 2019 is-3.53% and 12.5% respectively. The 64% growth rate of Q3 has shown an upward inflection point. We expect the performance inflection point trend to continue, mainly based on: 1) the company's PVP series products rank third in the world, and there is still a lot of room for development. According to the company's 2018 annual report, the company has signed a major sales agreement with an international well-known pharmaceutical company in 2018. The performance period is from January 1, 2020 to March 31, 2023, which is expected to bring the company about 190 million yuan in revenue and 99.645 million yuan in net profit. 2) BV will have a significant synergistic effect with the company's precision medical business in research and development, market and other aspects. in addition to opening up its own performance, BV products, as the key raw materials for Sanji biology and crystal energy biology in the company's precision medical sector, can also greatly reduce the company's procurement costs. 3) according to the company's mid-2019 report, more than 40 precision medical studios have been set up, and the company holds 51% of the shares, which is of great significance in linking up various business platforms and medical resources. H1's income of 57.5226 million yuan is close to 59.4153 million yuan in 2018. The net profit in the first three quarters increased by about 16 million yuan compared with the same period last year.
Occupying the dominant track, Songjiang base has huge room for growth after it is put into production.
In addition to continuously consolidating the competitive advantages of the original business, the company also creates new profit growth points through continuous strategic investment. The company participated in Yongtai Biological in May 2018, holding 1.9% of its shareholds. according to the application data of Yongtai Biological for listing on the main board of Hong Kong stocks submitted on September 2, its core product, EAL, is the only immune cell product approved to enter the II phase clinical trial of solid tumor treatment in China, and is expected to be listed on the Stock Exchange in December 2019. In July 2019, the company invested in CAR-T whole industry chain company Huadao Biology, with a stake of 14.55%. Huadao Biology received a clinical trial notice issued by the State Drug Administration on October 30. The feasibility report announced by the company in August shows that the Songjiang base project of New Open Source (Shanghai) Medical Technology Co., Ltd. will invest 1.667 billion yuan in the precision medical industry chain, with a construction period of two years. It is estimated that after reaching production, the annual income will be 2.01 billion yuan and the net profit 305 million yuan.
With the introduction of new shareholders, management efficiency is expected to be improved.
The announcement of the company on October 25 will introduce strategic shareholders, and the actual controller and major shareholders will sign a strategic cooperation agreement with Jiaxing Jiawen. The total proportion of the shares to be transferred and entrusted voting shares shall not be less than 20% of the total share capital and not more than 29.99%. The controller of Jiaxing Jiaxing is the Central Huijin Investment Co., Ltd. We believe that after the acquisition of BV, the proportion of equity in the company is relatively scattered, and the introduction of new shareholders and the concentration of voting rights will help to improve the efficiency of the company's management and operation.
Investment suggestion
It is estimated that the operating income of the company from 2019 to 2021 is 1.415 million yuan, the net profit is 1.78 million, and the EPS is 0.55, 0.99 and 1.29, respectively. The current share price corresponding to PE is 2019 times higher than that of 27-15-12. The company's performance has reached an upward inflection point, and as the performance enters a period of rapid growth, it is expected to usher in Davis' double-click. Coverage for the first time, giving a "overweight" rating.
Risk hint
The risk of a sharp rise in the price of PVP raw materials; the risk that the construction schedule of new projects is not as expected.
