Events:
Recently, Daan Genetics issued a performance revision announcement for the first half of 2020: the company's estimated net profit for January-June 2020 will be raised from 400.00% 643.64% to 924.57% 1222.03% for January-June 2020 from 302.56 million yuan to 450 million yuan to 620 million yuan to 800 million yuan.
Main points of investment:
Under the COVID-19 epidemic, the demand for kit surged, and the performance of Da'an increased significantly in the first half of the year. The company issued a forecast of performance revision for the first half of 2020: the net profit for the first half of 2020 is expected to be 6.2-800 million yuan, an increase of 924.57% and 1222.03% over the same period last year, far exceeding market expectations. We believe that it is mainly due to the increased demand for kit and testing services brought about by the COVID-19 epidemic. The first batch of COVID-19 nucleic acid detection kits were successfully developed on January 20, 2020, and the double gene targets of ORF1ab and N were detected at the same time. On January 28, the NMPA emergency approved the Da'an new crown kit, on March 2, the company's kit was certified by EU CE, and on May 14, it was included in the list of emergency use of the World Health Organization. Since the outbreak of COVID-19, the daily output of the company's kit has increased from 50,000 to 100000. In the first half of the year, the company's production of COVID-19 test kit is expected to exceed 30 million. It is expected that there will be a rigid demand for kit in the second half of the year with the normalization of domestic testing and the continued spread of COVID-19 epidemic overseas. In the domestic market, the company has been selected into Hubei, Heilongjiang, Fujian, Guizhou, Liaoning, Shanxi and Guangdong, Yunnan, Guangxi, Chongqing, Hunan, Jiangxi and the joint centralized procurement list of Beijing, Tianjin and Hebei, which is expected to boost the domestic market. COVID-19 's epidemic situation has led to the rapid growth of the company's testing kits and instruments, and the high quality of the products has laid a solid market foundation. We are optimistic about the medium-and long-term sales volume of COVID-19 's nucleic acid kit under the normalization of the epidemic.
With the integration of molecular diagnosis, Daan is expected to come out in the first year of nucleic acid testing. The COVID-19 epidemic will open a new stage in the nucleic acid testing industry, mainly based on three points: 1) under the normalization of the COVID-19 epidemic, the scope of nucleic acid testing will be expanded; 2) in the post-epidemic era, nucleic acid testing terminals will be expanded from people to food and the environment; and 3) the construction of grass-roots PCR laboratories has brought about an increase in the demand for nucleic acid kits for a long time.
Daan was founded in 1988 and has been deeply engaged in nucleic acid detection for more than 30 years. At present, it has formed the layout of the whole industry chain: self-produced upstream enzymes, primers to kit, instruments (extraction instrument, amplification instrument, PCR instrument) and then downstream medical laboratories. Daan's third-party medical laboratory is operated by Yunkang Health Industry Investment Co., Ltd., a subsidiary holding 46.96% of the shares. Yunkang currently has six independent medical laboratories, mainly in cooperation with hospitals to build joint laboratories. Therefore, Daan has a lot of experience in laboratory construction. In addition, Daan began to help grass-roots hospitals build PCR laboratories in the 1990s, with 20 years of first-mover advantages to assist in the construction, and in the future to take the lead in benefiting from the tide of PCR laboratories in grass-roots hospitals, overlaying the company's layout of the whole industry chain in molecular diagnosis, we are optimistic that its performance will continue to improve after capital activation.
The reform of listed companies in colleges and universities, Da'an development to meet the inflection point. Colleges and universities do not have the strategic goal of performance growth for their enterprises, and do not bring the driving force for the long-term development of enterprises, so the operating performance of listed companies in colleges and universities is not ideal. This time, Sun Yat-sen University, the largest shareholder of Daan Gene, transferred 100% of its shares to Guangzhou Financial holding Group for free, and the actual controller changed from the school to the Guangzhou Municipal people's Government. Government assets have the strategic goal of long-term stable growth of corporate assets. We are optimistic that Daan will activate the vitality of the internal development of the enterprise in the form of improved incentive mechanism after the change of controlling shareholders, and the development of the main business will be accelerated.
Profit forecast and investment rating: as one of the representative enterprises in the integration of nucleic acid testing services, we are optimistic that under the dual influence of COVID-19 's epidemic situation, the improvement of the prosperity of the nucleic acid testing industry and the improvement of the operating efficiency of major shareholders have ushered in the inflection point of development. It is estimated that the EPS of the company from 2020 to 2022 is 1.19,0.87 and 0.98, and the PE of the previous share price is 27.31,37.68,33.45, covering for the first time and giving a buy rating.
Risk hints: policy change risk; molecular diagnosis upstream raw material fluctuation risk; COVID-19 epidemic situation towards uncertain risk; shareholder change to promote the development of the company is not as expected