Event

The company releases its third quarterly report for 2022

On October 28, 2022, Elon Technology released its three-quarter report. In the first three quarters, the company achieved operating income of 302 million yuan (+ 45.64%), net profit of 61 million yuan (+ 53.33%), net profit of 55 million yuan (+ 50.02%) and EPS of 0.79 yuan.

Brief comment

The performance is in line with expectations, and the new medical infrastructure maintains high prosperity.

In the first three quarters, the company achieved operating income of 302 million yuan (+ 45.64%), net profit of 61 million yuan (+ 53.33%), and non-return net profit of 55 million yuan (+ 50.02%).

The performance is in line with expectations, and the net profit and deduction of non-return net profit are close to the upper limit of the previous performance forecast range. Q3 achieved revenue of 136 million yuan (+ 76.86%) in a single quarter, net profit of 31 million yuan (+ 45.39%) in a single quarter, and 29 million yuan (+ 40.60%) in a single quarter. The company maintained high growth in revenue and profit in the third quarter, which is expected to benefit mainly from the high prosperity of new domestic medical infrastructure and the continued development of medical automation projects, which will continue to contribute to the performance increment of the company.

The gross profit margin fluctuated slightly, and the operating cash flow and contract liabilities increased sharply. In the first three quarters of 2022, the company's gross profit margin was 54.74%, down 5.33% from the same period last year, which is expected to be mainly caused by changes in product structure and the increase in project implementation costs.

The rate of sales expenses was 14.04%, down 3.98% from the same period last year, the rate of management expenses was 9.08%, down 4.22% from the same period last year, and the rate of R & D expenses was 9.82%, down 4.02% from the same period last year. The decline in the expense rate is expected to be mainly due to the small increase in the absolute amount of the company's expense input, and the rapid growth of income brings scale effect. The financial expense rate was 0.74%, an increase of 2.34% over the same period last year, which is expected to be mainly due to the increase in borrowing. The net cash flow of operating activities in the first three quarters was 61 million yuan, an increase of 438% over the same period last year, mainly due to the company's strengthening the management of accounts receivable and the receipt of advance payments for new orders. By the end of the third quarter, the company's contract liabilities were 163 million yuan, an increase of 135% over the same period last year, and orders on hand are expected to maintain a high growth, providing a good support for follow-up growth.

Buyback shows confidence in development, discount loan is expected to provide financial support in April 2022, the company announced that it intends to use its own funds to buy back shares, the repurchase amount is between 61.76 million and 124 million yuan, all the repurchased shares will be used for employee stock ownership plans or equity incentives. As of September 30, the company had bought back 745052 shares of the company by means of centralized bidding transactions, accounting for 0.965% of the company's total share capital, with a total payment of 25.45 million yuan. The company's buyback plan shows confidence in future development. If equity incentives or employee stock ownership plans are launched in the future, it is expected to further enhance the enthusiasm of employees and be conducive to the long-term development of the company. Since September, the National standing Committee has put forward a discount loan policy, and the Health Commission has issued relevant recommendations on the use of discount loans to purchase equipment. We expect that discount loans will also be good for medical automation equipment procurement. On the one hand, it can provide financial support for hospital equipment procurement and improve the certainty of order performance. On the other hand, it is also expected to contribute some incremental orders.

Short-term benefit from new medical infrastructure and discount loan policy, new products help to obtain orders for hospital-wide solutions in the short term, new medical infrastructure is expected to bring incremental demand for medical automation systems, and the prosperity of the industry is expected to continue to rise. discount loans are expected to enhance order certainty In the medium and long term, the company continues to increase the layout of research and development and launch upgraded products, and the "integrated warehouse and development" project is expected to further enhance the company's competitiveness and project unit price. at the same time, the company is also actively promoting the automatic treatment project of medical and hazardous wastes. it is expected to further expand the space for business growth. It is estimated that the company's net profit from 2022 to 2024 will be 1.28,1.68 and 217 million yuan respectively, with a growth rate of 34.0%, 31.5% and 28.6% respectively. Based on the closing price of 42.10 yuan on October 28, 2022, the PE for 2022-2024 will be 25,19 and 15 times respectively. Maintain the buy rating.

Risk hint

1) risk of uncertainty of epidemic situation: COVID-19 epidemic situation is still distributed in some parts of the country, and repeated subsequent epidemics may lead to delays in installation progress or order confirmation, which will adversely affect the operation of the company. 2) the market competition aggravates the risk: at present, the concentration of the domestic automatic dispensing machine industry is relatively high, and the company's market share is in the lead. If the number of new entrants in the follow-up industry increases, it may lead to intensified competition and adversely affect the price and profit margin. 3) the risk of decline in the prosperity of new medical infrastructure: in recent years, there are more new, reconstruction and expansion hospital projects, resulting in strong demand in the medical automation industry, and the company's on-hand order growth rate is relatively high. If the subsequent industry demand falls, it may lead to a decline in the growth rate of company-on-hand orders. 4) the risk that the R & D progress is not as expected: if the progress of the company's new product research and development and new business development is lower than expected, it may adversely affect the company's future growth.