Main points of investment
Event: the company announced that its operating income was 2.284 billion yuan, an increase of 35.45% over the same period last year, its net profit was 621 million yuan, an increase of 164.85% over the same period last year, and its non-net profit was 612 million yuan, an increase of 179.14% over the same period last year. At the same time, the company announced that it is expected to achieve a net profit of 18-2.1 billion yuan, an increase of 380-460% over the same period last year.
2020Q3 performance exceeded expectations, glove benefit from the epidemic continued to grow high, profitability increased significantly. The company's 2020Q2 achieved operating income of 1.387 billion yuan in a single quarter, an increase of 63.07% over the same period last year, and net profit of 477 million yuan, an increase of 243.95% over the same period last year, deducting 479 million yuan of non-net profit, an increase of 246.45% over the same period last year. This is mainly due to the rapid growth of income and profit brought about by the sharp rise in glove prices under the epidemic. According to the company's 2020Q3 forecast, the net profit in the third quarter was 12-1.5 billion yuan, with a median growth rate of about 857%, exceeding market expectations. The epidemic dividend in the glove sector continues. In terms of profitability, the increase in glove price led to an increase in glove gross profit margin from 15.30% in 2019 to 48.55%, a comprehensive gross profit margin of 53.43%, an increase in 8.04pp over the same period last year, and a net profit rate of 27.37% in the company, an increase in 12.68pp over the same period last year.
With the continuation of the overseas epidemic, glove prices are expected to remain high in the medium term, leading to sustained and rapid growth in glove performance.
The income of 2020H1's glove business reached 1.579 billion yuan, an increase of 97.47% over the same period last year. Under the global COVID-19 epidemic, the serious imbalance between supply and demand of gloves has led to a continuous rise in glove prices, which has brought a large performance increment to the company. Considering that gloves require high technology and capital scale, and production capacity is difficult to release quickly, we expect glove prices to remain high in the medium term. In addition, the company expects at least 5 billion PVC, nitrile, TPE gloves and other projects to be put into production in the second half of 2020, and 30 billion nitrile gloves have been put into production from 2021 to 2023, with a total annual production capacity of nearly 60 billion gloves, bringing long-term growth of the glove business.
Cardiovascular business is under short-term pressure, and drug balloons, heart valves and other important new products have been put on the market one after another in the medium and long term.
The company's cardiovascular equipment business 2020H1 achieved revenue of 510 million yuan, down 39.12% from the same period last year, mainly due to the short-term decline in the number of PCI surgeries under the epidemic. Considering that the heavyweight varieties BioFreedom, rapamycin family drug balloons, cobalt-chromium alloy BioFreedom and so on are expected to be approved one after another in the next 1-2 years, superimposed with advanced European TAVR products, the performance is expected to pick up quickly after the epidemic.
Profit forecast and valuation: according to the 2020 mid-year report, we adjusted the profit forecast. It is estimated that the company's revenue from 2020 to 2022 is 79.99,80.77 and 8.629 billion yuan, an increase of 130.15%, 0.97% and 6.83% over the same period last year, and the return net profit is 32.58,21.18 and 1.739 billion yuan, an increase of 564.42%,-35.00% and-17.88% respectively, corresponding to EPS of 3.38,2.20,1.80%. Considering that the volume and price of the company's glove business has risen in both volume and price under the epidemic, the performance is expected to continue to exceed expectations, and the cardiovascular innovative equipment products are about to enter the harvest stage. We use the segment valuation method, and the reasonable market value will be about 50-60 billion yuan in 2020, maintaining the "buy" rating.
Risk hints: product market promotion does not meet the expected risk, policy change risk, product research and development failure risk, the impact of glove price fluctuations.