Incident: The company announced its 2020 annual report, achieving operating income of 7.869 billion yuan, an increase of 126.42% over the previous year, and the net profit of the mother was 1,758 million yuan, an increase of 258.66% over the previous year, after deducting non-net profit of 1,742 billion yuan, an increase of 268.23% over the previous year.
The glove business continues to thrive, and its performance continues to grow at a high rate. The company achieved operating income of 3,214 billion yuan in the single quarter of 2020Q4, an increase of 266.50% over the previous year. The main reason was that the company calculated Tibasheng International Goodwill impairment of 1,755 billion yuan due to prudential principles. Excluding the impact of goodwill impairment, the company deducted 3,501 billion yuan of non-net profit in 2020, an increase of 597.23% over the previous year. Mainly, the sharp increase in glove demand under the COVID-19 pandemic brought about an imbalance between supply and demand, and glove prices increased significantly. In terms of profitability, the increase in glove prices brought the gross margin of gloves to 63.48% from 15.30% in 2019, the comprehensive gross profit margin was 64.40%, an increase of 17.77 pp over the previous year, and the company's net profit margin was 22.40%, an increase of 7.45 pp over the previous year.
The overseas epidemic continues, and glove prices are expected to remain high in the medium term, driving continued rapid growth in glove performance.
In 2020, the company's glove business achieved revenue of 6.753 billion yuan, an increase of 302.39% over the previous year. As the global COVID-19 pandemic continues to spread, we expect glove prices to remain high in the medium term. By the end of 2020, the company's main glove categories will have an annual production capacity of more than 20 billion PVC gloves and an annual production capacity of nitrile gloves will exceed 6 billion units. It is estimated that in 2021, the company will release more than 22 billion new gloves, with a cumulative production capacity of more than 52 billion units, continuing to contribute to increased performance.
Domestic collection+ongoing foreign epidemics put pressure on the cardiovascular business in the short term. In the medium to long term, major new products such as drug balloons and heart valves will be launched one after another. The company's cardiovascular equipment business achieved revenue of 996 million yuan in 2020, a year-on-year decrease of 43.24%, and a net profit of 340 million yuan. The 2020 performance promise was not fulfilled, mainly due to the short-term year-on-year decline in the number of PCI surgeries at home and abroad under the influence of the epidemic (domestic PCI surgery volume fell 5.50% year-on-year). Currently, the company's cardiovascular product line has been expanded from a single coronary stent to the world's leading TAVR products. The innovative product, the second-generation BioFreeDom, has been approved in many overseas regions in 2020. In the future, the company will Continuously expand product lines related to drug balloons (clinical development in China, Europe, and Southeast Asia), calcification and CTO lesions, and vascular interventions such as mital/tricuspid valve replacement/repair to enhance the competitiveness of the product portfolio and create a comprehensive global platform for cardiovascular devices.
Profit forecast and valuation: We expect the company's revenue from 2021-2023 to 128.47, 139.77, 14.308 billion yuan, up 63.25%, 8.80%, 2.37% year on year, and net profit of 59.76, 44.71, 3.305 billion yuan, up 239.85% year on year, -25.18%, -26.07%, corresponding to EPS 5.85, 4.38, 3.24. Considering that the volume and price of the company's glove business have risen sharply under the pandemic, innovative cardiovascular equipment products are about to enter the harvest stage. The current stock price corresponds to 4 times PE in 2021, maintaining the “buy” rating.
Risk warning: the risk of product marketing not meeting expectations, the risk of policy changes, the risk of product development failure, and the impact of glove price fluctuations.