"15 Times Growth" Deliberately Ignored By Institutions: Zhende Medical Can'T Keep Pace With Steady Medical Care?

Zhu Yiyi, researcher of 21st Century Capital Research Institute

The capital story triggered by a mask is undergoing dramatic structural changes.

The 21st Century Capital Research Institute learned during a visit that a medical device company in Fujian is digesting the mask inventory through various channels. "Our company still has 600000 disposable civil protective masks, 500000 disposable medical protective masks, 900000 disposable surgical protective masks, 0.3 yuan for disposable civil use, 0.4 yuan for disposable medical use and 0.5 yuan for disposable surgery. At present, our company can lose money Li ".

This issue of "21 hard core investment research" focuses on Zhende medical (603301. SH), which will be listed for three years.

Under the background of the rapid increase of market demand for masks and protective clothing due to the outbreak of new crown pneumonia, Zhende medical once became the "head of mask concept" in the market.

In 2020, the annual revenue of Zhende medical is expected to reach 10.267 billion yuan to 10.665 billion yuan, and the net profit attributable to the parent company will increase by 2.383 billion yuan to 2.461 billion yuan on a year-on-year basis. Not only does the revenue scale exceed the sum of the past five years, but also the net profit is four times of the total in the past five years.

The growth capacity of protective products can be seen.

As a result, Zhende medical's share price rose nearly three times to 55.66 yuan per share (closing price on April 9) from 19.82 yuan per share.

Apart from the "business of masks and protective clothing", why does Zhende Medical Co., Ltd. maintain high growth mode?

About 120 million restricted shares of Zhende medical will be lifted and listed on April 12, accounting for 52.68% of the company's total share capital.

15 times growth secret

The business of "mask and protective clothing" has greatly enhanced Zhende medical.

In the first half of 2020, the revenue of Zhende Medical Co., Ltd. is 3.820 billion yuan. By the end of the third quarter of 2020, the revenue of Zhende medical has doubled to 8.117 billion yuan, and the net profit attributable to the parent company has reached 2.098 billion yuan,

Taking the third quarter report of 2020 as an example, the monetary fund of Zhende medical was 1.937 billion yuan, which was 646 million yuan in the same period of last year, with a year-on-year increase of 199.73%, while the cash flow from operating activities was 2.674 billion yuan, 99 million yuan in the same period of last year, with a year-on-year growth of 2601.7%.

In 2020, in addition to the expected revenue exceeding 10 billion, Zhende medical is expected to increase its net profit to its parent by 2.383 billion yuan to 2.461 billion yuan year on year, and the net profit of the previous year was only 157 million yuan, a 15 fold increase.

Undoubtedly, the most important thing is that the sales of anti epidemic protective products (mainly masks, protective clothing and isolation clothing products) have increased significantly. In 2020, the sales of epidemic prevention protective articles will reach 7.556 billion yuan to 7.746 billion yuan, with a year-on-year increase of 7.477 billion yuan to 7.667 billion yuan.

This growth has become the theme of Zhende medical secondary market.

What is intriguing is that Zhende medical specially mentioned two points. One is its advantages in the domestic market of hospital line and retail line (including drugstore retail line and e-commerce line), and the increase of market share and coverage after the acquisition of 55% equity of British rocialle healthcare limited.

The trend of the story has changed.

According to the reporter of 21st century economic report, when the core of the story of anti epidemic protective products turns from "production capacity competition" to "channel competition", the competition pattern of the whole industry will also change, and the pricing logic given by institutions to relevant listed companies is also changing.

Some people may remember that Zhende medical was formerly Shaoxing Zhende medical dressing Co., Ltd. (medical dressings are medical materials used to cover sores, wounds or other damages) and originated from OEM OEM of overseas medical device manufacturers.

According to the statistical data of the medical insurance chamber of Commerce, Zhende medical has been ranked among the top three medical dressings exports in China for many years.

After excluding the anti epidemic protective articles, the sales revenue of Zhende medical in 2020 will be 2.711 billion yuan to 2.919 billion yuan, an increase of 923 million yuan to 1.131 billion yuan, a year-on-year increase of 52% to 63%.

From the financial report, in recent years, the proportion of Zhende medical's overseas income has gradually decreased from 80% to about 60%.

When the anti epidemic protective products bring huge profit effect, Zhende medical needs to make a "difficult" choice under the original business pattern. At the same time, the unknown brought by this choice will be the biggest problem it will face in the short term.

Can the mask market continue?

"The company's business performance in 2020 increased significantly compared with the same period of last year, mainly due to the impact of the epidemic situation. However, with the progress of epidemic prevention and control, the production capacity of market anti epidemic protective products and the change of competition situation, it is uncertain whether the sales of anti epidemic protective products of the company will continue to maintain a substantial growth in the future."

Zhende's relatively calm reply in the medical announcement has re focused the market on its growth space.

In reply to investors' questions on March 8, Zhende medical mentioned the latest production capacity of masks, "the company's current daily production capacity of plane masks is about 15 million, and that of kn95 masks is more than 1 million. The production and sales are normal. In the future, the company will adjust the production capacity of protective products in time according to the market and other external conditions and changes in demand.".

One month ago, in early February 2021, Zhende medical has just released an investment plan of 650 million yuan, which focuses on the layout of new protective equipment.

In the total investment of 650 million yuan, "the land cost, construction and installation and other engineering expenses of the production base and Research Institute are about 420 million yuan", and "the purchase cost of new protective equipment production equipment is 47 million yuan".

Zhende medical said, "after the production line of new protective equipment in the investment project is put into operation, it can further improve the specification and production capacity of the company's new protective equipment, and better meet the needs of the market and customers.".

This strategy is interpreted by analysts as "chasing after victory".

However, there are already signals that Zhende medical has realized that the core problem in the future is not "capacity competition".

On March 28, Zhende medical officer issued a micro article, and Hu Junwu, vice president of Zhende Medical Co., Ltd., said in an interview that "many products are sold online to cover the consumer demand of more young people, from tob mode to both b-end and C-end markets."

"Co branded masks with Teddy, bad reviews and Adm. Teddy faces more families, while the co branded masks of bad reviews and ADM are more niche and personalized, and are deeply loved by young people. "

Of course, whether this new story can be told well still faces many uncertainties.

On April 9, the 21st Century Capital Research Institute contacted Ji Baohai, director of Zhende medical, to learn about the production and sales of masks of the company. He said that "the company is in the silent period of the annual report", so it is not convenient to respond to relevant questions.

It is quite optimistic that according to the data of tmall's "medical masks list" (sorted by sales volume in recent 7 days), "Zhende" adult surgical masks rank first with weekly sales of 115000 pieces, "palm care" medical masks ranked second with weekly sales of 69000 pieces, and "Yingyi" disposable medical masks ranked third with a weekly sales of 67000 pieces. In addition, brands such as "Zhuqi" and "Heishi Hainuo" also ranked top.

However, on the other side of the story, another enterprise known by the 21st Century Capital Institute, which had hundreds of employees, assigned each employee a plan to sell 5000 masks per person.

A company producing masks in Zhejiang told the 21st Century Capital Research Institute, "previously, in order to cope with the urgent situation of epidemic prevention, the company urgently changed production and added new mask production business. Now, after a special stage, the domestic mask production capacity is relatively saturated, and will not take the mask production as the main business." now, we have more orders to produce on demand, of course, our mask production The workshop and equipment are kept in case of similar emergency.

Another A-share listed company, in its 2020 annual report data, mentioned that "clothing manufacturing and other" revenue was 49.7673 million yuan, with a gross profit rate of 6.21%. The income increased significantly year-on-year, and the gross profit rate decreased significantly.

The main reason is that the subsidiary company undertook the production orders of government epidemic prevention masks during the epidemic period, and the gross profit rate of such anti epidemic materials was low.

Next stop of high growth story

Perhaps aware of the uncertainty of the growth of anti epidemic protective products, Zhende medical has also expanded its scope to include surgical sensing and control, stoma care, and sports rehabilitation.

Among the above 650 million yuan investment projects, 2.4 million surgical access medical devices (disposable puncture devices, etc.) are also included.

Zhende medical quoted the data disclosed in the prospectus of Kangji medical Holding Co., Ltd.: in 2019, the number of disposable puncture devices in China was 18.4 million, and the sales volume reached 1.777 billion yuan, of which the number of domestic disposable puncture devices accounted for about 87.6%. In 2019, Kangji medical will realize the sales amount of disposable puncture device of RMB 251 million.

In October 2020, Kaiyuan securities research paper pointed out that "Zhende medical, with its brand influence and channel advantages, is rapidly expanding its sex control products. Assuming that the company's market share is 30% - 40%, the domestic market will reach 3-4 billion yuan, with a compound growth rate of 68% in the next three years, which is expected to become one of the core businesses of the company.".

This long-term report is one of the few securities companies concerned about Zhende medical.

The business extension impulse of Zhende medical does not start here.

As early as August 2018, Zhende medical announced that it would acquire 100% equity of Hangzhou Pujian Medical Equipment Co., Ltd. with its own capital of 21.7 million yuan. Hangzhou Pujian's main products are surgical sensing and control products (disposable surgical bag, disposable operating suit and disposable suction bag).

In January 2019, Zhende medical purchased 70% equity of Suzhou meidis medical Sports Products Co., Ltd. with RMB 104.16 million in cash. Suzhou middis is an enterprise that has entered the field of self-adhesive bandage manufacturing earlier in China. At present, it has 27 patents and 23 trademark rights. It has established a relatively perfect sales system and channel network in the international market. Its products are sold to many countries and regions such as America, Europe, Africa, Australia, Asia, etc.

In the first three quarters of 2020, Zhende Medical Co., Ltd. acquired 60% equity of Zhejiang steinger sports protection technology Co., Ltd. with a total cost of 75 million yuan through capital increase and share expansion and cash acquisition.

In the capital market, these stories seem to be dull compared with those in the same industry.

What is the gap with 50 billion healthy medical care?

Zhende medical's comparable A-share listed companies are mainly robust medical (300888. SZ) and Ogilvy medical (002950. SZ).

According to the data of Dongcai choice, in 2020, robust medical is highly sought after by institutions, with 324 funds holding shares, accounting for 3.98% of the total equity. By contrast, Zhende medical has 62 funds, accounting for 1.05% of the total equity, and Ogilvy medical has 48 funds, accounting for 0.51% of the total equity.

Robust hospital also started from medical dressing OEM, but its experience in the capital market is extremely rich.

In 2005, robust healthcare was listed in the US OTCBB, listed on the NYSE in 2009, transferred to NASDAQ in 2010, delisted in 2012, and finally landed on the gem of Shenzhen Stock Exchange in September 2020.

Robust medical mainly adopts the mode of "medical + consumption". At present, it mainly deals in medical and consumer goods business with "cotton" as the core, and has two major brands of "robust medical" and "cotton era".

In the part of medical business, steady medical mainly focuses on wound care and protection products, with about 70% of overseas OEM income, supplemented by domestic market; consumer business mainly focuses on cotton towel, baby clothing, underwear and other products, with online sales accounting for about 60%, and there is a new brand "Jinliang life".

In 2019, the revenue of robust medical services will change from "3" to "4", with revenue of 4.575 billion yuan and net profit attributable to parent company of 546 million yuan. The net profit of parent company will remain around 400 million yuan in 2016-2018.

Although the revenue scale is not as large as that of Zhende medical, as of April 9, the total market value of robust medical was 57.5 billion yuan, far exceeding the total market value of Zhende medical by 12.65 billion yuan.

Another Ogilvy medical, which mainly deals in medical dressings, was listed in March 2019. At present, it has been listed for one year with a total market value of 11.93 billion yuan, which is equivalent to Zhende medical.

Ogilvy medical said that affected by the epidemic situation, the company's sales of infection protection products increased significantly. According to the preliminary calculation of the company's financial department, the revenue of anti epidemic protective products accounted for 37.65% - 39.33% of its revenue in 2020. In 2020, Ogilvy medical is expected to have a net profit of 1.150 billion yuan to 1.200 billion yuan, with a year-on-year increase of 253.00% - 268.38%.

From 2017 to 2019, the revenue scale of Ogilvy medical is 1.711 billion yuan, 2.028 billion yuan and 2.352 billion yuan respectively, and the net profit is 234 million yuan, 228 million yuan and 326 million yuan respectively.

Ogilvy medical is also mainly for export. In 2019, its overseas business income was 2.080 billion yuan, accounting for 88.41%, which continued to grow steadily; the domestic income was 273 million yuan, accounting for 11.93%, and the domestic business gradually took a firm foothold.

Ogilvy medical said that in the future, the company will increase the development of domestic market, focus on improving the profitability of domestic market business, and accelerate the completion of the layout in the domestic market.

?