occurrences
Wandong Medical released its 2019 annual report and 2020 quarterly report.
Brief review
The 2019 performance was in line with expectations. Products such as nuclear magnetics and DSA achieved high growth. The company achieved operating income of 982 million yuan for the full year of 2019, an increase of 2.92% over the previous year, net profit of 169 million yuan, an increase of 10.14% over the previous year, after deducting non-net profit of 148 million yuan, an increase of 8.19% over the previous year, and EPS of 0.31 yuan, in line with expectations.
The company's DR and nuclear magnetics revenue accounted for about 50% and 30%, respectively. The number of DR units installed each year in the past 2 years has been close to 1,800 units, and sales in 19 and 18 are close. We expect a decrease in private and collection orders and an increase in retail orders for public hospitals; the number of units sold by the company's magnetic resonance products and sales have all increased steadily, with an increase of around 15%. DSA's product beneficiary configuration certificate cancellation policy has achieved rapid growth; the company's mobile DR is currently the mobile DR with the strongest battery life and the lightest quality in the domestic market, with significant growth in 2019; Wanliyun's remote diagnosis service business is in a leading position in the industry, with more than 4,600 online hospitals, continuing to rank first in the same industry.
The first quarter reported high performance growth, slightly exceeding expectations
The company achieved operating income of 250 million in the first quarter of 2020, an increase of 54.53% over the previous year, and the net profit of the mother was 50.7 million, an increase of 787.21% over the previous year, slightly exceeding expectations. The company reported high quarterly performance growth, mainly related to the sharp increase in demand for DR and mobile DR during the pandemic. We expect the company's DR and mobile DR sales to be close to 1,000 units in the first quarter; the company's overseas mobile DR orders increased in the second quarter, and products such as nuclear magnetics and DSA resumed growth trend.
The leading position in the medical imaging industry is stable. DR and NMR products, which have core technical advantages, have had the highest domestic market share for 10 consecutive years. Both NMR sales and number of units sold ranked among the top two domestic brands. DSA has always ranked first among domestic manufacturers in the past 20 years, and digital gastrointestinal products are on par with the largest imported brands. The company has mastered all core DR technologies, has complete independent intellectual property rights, and industrialized all key components and complete machines such as high-frequency high-voltage generators, flat panel detectors, DR image software, X-ray tube components, etc. The functional performance has reached the international advanced level. Some indicators are superior to international advanced levels, meeting the equipment needs of primary hospitals to tertiary hospitals. The company's 1.5T superconducting MRI, which includes core components such as spectrometers, coils, sequence control, and MRI image software, are all independently developed, and the functional performance meets the clinical use requirements of the top three hospitals. As the company accelerates the launch of new 1.5T superconducting MRI and 1.48T superconducting MRI, and further develops superconducting MRI of 3.0T and above, the company's competitiveness in the field of superconducting MRI will continue to improve.
Increased investment in new medical infrastructure can be expected, and Wandong Healthcare is expected to benefit
Recently, various provinces issued documents stating that they want to increase financial investment in the field of public health. Among them, Yunnan Province mainly invests in the construction of infectious disease hospitals (hospitals) and disease control systems, Henan Province mainly builds hospitals and public health centers for infectious diseases, and Suzhou in Jiangsu Province focuses on the construction of the top three hospitals and public health systems. We expect that in the future, more provinces will implement the spirit of the country's instructions to reform and improve the prevention, control and treatment system for major epidemics, strengthen and improve the province's infectious disease medical treatment network, which will drive the procurement demand for related medical equipment, and it is expected that Wandong Medical will continue to benefit.
Financial indicators are generally normal
The company's overall gross margin in 2019 was 46.87%, an increase of 3.27 percentage points. The cost rate for the period was 26.96%, a decrease of 0.33 percentage points, of which the sales cost ratio was 14.80%, a decrease of 0.81 percentage points. The main reason was that the subsidiary, Wandong, Hunan, was no longer included in the scope of the merger in the same period last year; R&D investment increased by 34.79%. The main reason was that investment in TURBOTOM 3200X X-ray computed tomography equipment and the 3.0T superconducting magnetic resonance imaging system was raised to raise the remuneration level of key R&D personnel.
Optimistic about long-term development potential
The company is a leading domestic medical imaging equipment enterprise. It is expected to achieve rapid growth in the next few years in the context of new infrastructure to promote the expansion of the equipment market, the country encourages the autonomy and control of high-end medical equipment, the continuous upgrading of products, the gradual increase in the sales share of level-II and tertiary hospitals, and the implementation of sales reforms based on successful pilot agent channel work. We continue to be optimistic about the company's development potential. We expect the company's net profit to be 208 million yuan, 251 million yuan, and 300 million yuan respectively in 2020-2022, with growth rates of 23.29%, 20.41%, 19.48%, EPS of 0.38, 0.46 and 0.55 yuan respectively, and PE of 45, 37 and 31 respectively, maintaining the increase in holdings ratings.
Risk warning
The progress of new product launches fell short of expectations, and mergers and acquisitions fell short of expectations.
