On the evening of August 25, 2020, the company released its mid-year report in 2020: operating income was 2.284 billion yuan, up 35.45% over the same period last year; net profit was 621 million yuan, up 164.85% over the same period last year; and 612 million yuan was deducted from non-home net profit, an increase of 179.14% over the same period last year.
At the same time, the company issued a forecast of the results of the three quarterly reports in 2020, which is expected to achieve a net profit of 18-2.1 billion yuan, an increase of 380-460% over the same period last year.
Glove business benefits from the rising demand for protection, and since June product prices have been in line with the market to provide greater flexibility.
From a quarterly point of view, the company's 2020Q1-Q3 net profit in a single quarter is 145 million yuan, 477 million yuan and 1.329 billion yuan respectively (median estimate). The reason for the significant increase in performance quarter by quarter is mainly due to the company's concept of good faith cooperation and long-term strategic development considerations, and the order price to achieve revenue before late May has not yet been fully in line with the market real-time price. Since June, the price of the company's gloves has begun to approach the market price and has been accepted by many downstream customers. it is expected that the performance contribution of the company's medical and protective gloves in the second half of the year will far exceed that of the first half of the year.
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, comprehensively enhancing the company's business scale and industry influence.
From the price point of view, the prices of PVC gloves and nitrile gloves have risen sharply since the outbreak of the epidemic. Since August, the price of PVC gloves has increased again, and the price of nitrile gloves has basically remained stable, laying a good foundation for the performance in the second half of the year.
The cardiovascular business needs to be recovered due to the negative impact of elective surgery, and new products to strengthen the layout of the track will be approved soon.
Affected by the global outbreak of COVID-19, the number of elective operations such as PCI decreased. The company's cardiovascular business revenue in the first half of the year was 510 million yuan, down 39.12% from the same period last year. However, stent surgery is the rigid demand of diagnosed patients, and it is usually understood that the outbreak will only cause a time adjustment to the number of stent surgery, and it is expected that there will be a compensatory rebound after the end of the epidemic.
From the perspective of the domestic market, Jiwei Medical has developed 234 new hospitals by improving the ability and efficiency of the sales team and channels, and strengthening brand promotion and professional education, so that the new generation of EXCROSSAL stent implantation has increased by 100% compared with the same period last year, and the overall stent implantation remains basically the same as the same period last year. At present, the domestic epidemic situation has stabilized, the company's domestic stent business has returned to normal operation, the company will pay close attention to the follow-up development of this epidemic in the world.
At present, the company's main products listed in China include Excel and second-generation products EXCROSSAL, while Parkson International's products listed in Europe and Japan mainly include BioMatrix products and BioFreedom products. Among them, BioFreedom stent is expected to be approved by FDA and NMPA in China in the second half of this year; 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 and rich. In June 2020, 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.
Blue Fan Medical: global PVC glove faucet, nitrile production capacity expansion to meet the outbreak of demand.
Lanfan Medical is the largest manufacturer of health protective gloves in China and the global leader of PVC gloves. In 2019, it has a production capacity of 15 billion PVC gloves and 4 billion nitrile gloves. In 2020, the production capacity of PVC gloves and nitrile gloves increased by 4 billion and 2 billion respectively through the convertible bond investment project. In June 2020, the company announced that it planned to complete and put into production 30 billion nitrile gloves by December 2023, and build a new production capacity of 800 million PVC gloves in Vietnam. We believe that the company's glove business has obvious advantages in production cost, automatic control and sales layout, and the current COVID-19 epidemic has also given birth to a strategic opportunity for the restructuring of the global disposable protective glove industry chain. Lanfan is expected to achieve leapfrog development again by virtue of years of industrial accumulation and China's complete elements.
Profit forecast: considering that the execution price of the glove order is fully in line with the market since June, and the industry boom remains good, we raise the company's profit forecast.
It is estimated that the company's sales revenue from 2020 to 2022 will 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, 1.924 billion yuan and + 646.16%, 22.68%, 31.98% respectively. The current market capitalization is 29.1 billion yuan, corresponding to PE of 8-10-15. The company is a global leader in disposable gloves, significantly benefiting from the protection demand brought about by the COVID-19 epidemic, and the continuous production expansion plan for nitrile gloves is expected to continue to enhance market share and industry position. Coronary stent business is expected to usher in the development opportunity in the national collection of high-value consumables. Biofreedom stents and rapamycin coronary drug balloons are about to be approved for listing in China, providing the driving force for sustained growth. 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.