On the evening of October 28, 2020, the company released its quarterly report for the third quarter of 2020: operating income was 4.655 billion yuan, up 79.14% over the same period last year; net profit was 1.888 billion yuan, up 403.16% over the same period last year; and 1.878 billion yuan was deducted from non-return net profit, an increase of 442.40% over the same period last year.
Gloves business benefited from the epidemic volume and prices rose, capacity orders to ensure long-term growth.
Quarterly point of view, the company's 2020Q1-Q3 single-quarter net profit is 145 million yuan, 477 million yuan, 1.267 billion yuan, Q3 performance in line with previous expectations. The reason for the significant quarter-to-quarter acceleration of the company's performance is mainly due to the fact that based on the concept of good faith cooperation and long-term strategic development considerations, the order price for revenue before late May has not yet been fully in line with the market real-time price. From June, the price of the company's gloves began to approach the market price.
In terms of production capacity, the company has an annual production capacity of 2.5 billion PVC health protection gloves in the first half of the year.
The production line has been completed and put into production, increasing the production capacity of the company's medical and protective gloves, and further consolidating the global leading position in the market segment of PVC gloves; it is expected that in the second half of the year, the company will still have at least 5 billion PVC gloves, nitrile gloves, TPE gloves and other projects to be put into production; the company's current order schedule to the second quarter of next year, is still in a high boom.
From the price point of view, the prices of PVC gloves and nitrile gloves have risen sharply since the outbreak of the epidemic. At present, the price of protective gloves is steadily rising, in the case of a large gap in market demand, it is expected that the rising trend of demand and price will continue for some time.
Cardiovascular business needs to be restored, strengthen research and development and look forward to the launch of new products.
Affected by the global outbreak of COVID-19, the number of operations for elective surgery such as PCI has declined, but stent surgery is a rigid demand of diagnosed patients. The outbreak usually only causes a time adjustment to the number of stent operations, and it is expected that there will be a compensatory rebound after the end of the epidemic.
The company's BioFreedom stent is expected to be approved by FDA in the United States and NMPA in China in the second half of this year, and the new product coronary drug balloon is expected to be approved to market in the first half of 2021, when the product line in China's coronary intervention market will be more complete. In June, the company acquired the fifth TAVR manufacturer in the European market (NVT, Switzerland) and successfully added structural heart disease interventional valve products. In the future, the company will continue to expand PCI accessories, drug balloons, vascular intervention and other related product lines, enhance the competitiveness of product portfolio, and create a comprehensive global platform for cardio-cerebrovascular devices.
The global glove industry has significantly benefited from the COVID-19 epidemic protection needs, and the demand side is expected to grow by more than 20%.
From the perspective of glove demand, the global glove demand has maintained a long-term and steady growth. According to the data of China Plastics Association and Malaysia Glove Industry Association, the global medical grade glove market reached 306 billion in 2019. The market size of non-medical grade gloves reached 189 billion, and the glove industry as a whole maintained a steady growth of 8-10%.
According to a recent interview with Singapore's Lianhe Zaobao, Lim Wee Chai, chief executive of TopGlove, the world's largest glove maker, expects industry demand growth to accelerate to 25 per cent this year, 20 per cent next year and about 15 per cent in the post-epidemic period.
Profit forecast: the company's sales revenue from 2020 to 2022 is expected to be 8.348 billion yuan, 8.411 billion yuan and 10.411 billion yuan, respectively, a year-on-year increase of + 140.18%, 0.76%, 23.78%, and net profit of 3.658 billion yuan, 2.829 billion yuan, and 1.924 billion yuan, respectively, with an increase of + 646.16%, 22.68%, 31.98%. The current market capitalization is 23.9 billion yuan, corresponding to PE of 7-8-12. The company is a global leader in disposable gloves, significantly benefiting from the protection demand brought about by the COVID-19 epidemic. The continuous production expansion plan for nitrile gloves is expected to continue to increase market share and industry position, and maintain the company's "highly recommended" investment rating.
Risk tips: the risk of sharp price fluctuations in the glove market; the risk that the construction of new production capacity of gloves is not as expected; the risk of sharp price reduction in the collection of high-value consumables; the risk that sales of new products such as Biofreedom are not as expected.
