With the strength of good wind, send me to Qingyun——Comments on Wandong Medical’s 2021 Annual Report

1. This annual report of Wandong Medical is the first annual report of Midea Group after holding the shares, and the overall positive trend is confirmed.

2. The annual revenue is 1.156 billion yuan and the net profit is 183 million yuan, which is basically consistent with the revenue of 1.2 billion yuan and the net profit of 180 million yuan planned at the beginning of the year. The business plan for 2022 is 1.4 billion in revenue and 140 million in net profit. In the absence of major fluctuations in the external environment, there is a high probability that the annual performance will be around this level, that is, revenue will increase by 20% and net profit will decrease by about 25%. , which is generally close to the conditions for achieving equity incentives, which can be said to be relatively certain.

3. The R&D strength is still weak compared to its peers, the number of R&D personnel has not increased much, and the proportion of high-level education levels is still not large. The R&D investment is 100 million yuan, accounting for less than 10% of the revenue. The total amount and proportion are insufficient, and there is a big gap compared with the peer leaders. The equity incentive proposes that the R&D expense rate in the next three years should not be lower than 10%. At the same time, according to the fixed increase plan, the R&D investment in the next three years will increase significantly. It is expected that a considerable part will be capitalized, otherwise the net profit will be very ugly.

4. Business aspects

(1) Affected by the normalization of the epidemic, the DR market has declined sharply, and the company’s sales have also dropped by more than 20% (including mobile DR). This business is expected to enter a stable state in the future, and a small increase is expected. (Part of the annual report data does not match 2020)

(2) The sales volume of MRI has doubled, which is amazing. MRI is a big market, and Wandong has ranked fifth in the Chinese market in the market of 1.5T and below. According to the statistics of medical recruitment and procurement, in 2021, the domestic market will purchase a total of 1061 MRI sets, with an amount of 15.8 billion yuan. The concentration of the top four in MRI is very high. United Imaging, which ranks fourth, accounts for about 20%. If Wandong can reach half of United Imaging’s market share in the future, there is still about ten times the space. This will be a relatively long-term. process.

(3) DSA sales increased by 6 times, amazing. According to the statistics of medical recruitment and procurement, in 2021, the total number of DSA (Digital Subtraction Angiography System) purchased in China will be 960 units/set, with a transaction value of 9.1 billion yuan, and the three GPS companies will account for 93%. A substantial increase in sales revenue is basically certain.

(3) CT sales were flat. According to the statistics of medical recruitment and procurement, in 2021, the domestic sales of CT equipment will be nearly 4,875, and the transaction value will be 19.7 billion yuan. Wandong is still relatively weak at present, and its future goal is to become the fifth in the domestic market, which will also be a relatively long-term process. At present, the 16/32 row CT has completed the prototype development and is ready for testing and clinical. It is expected to become an important source of revenue growth in the future.

(4) The revenue of Wandong Yum (Suzhou) increased by 1.6 times. According to the data of medical recruitment and procurement, in 2021, the number of color Doppler ultrasound in the domestic market will total 15,478 units/sets, with a total amount of 19.2 billion yuan, and the top three will account for 70% (GE, Philips, Mindray). The annual report mentions that Wandong Baisheng (Suzhou) has obtained registration certificates for five ultrasound products and 17 patents related to ultrasound products. At present, the pre-research and accumulation of key ultrasound technologies has been completed, and new product designs will be added in 2022. At that time, cost-effective fully autonomous ultrasound products will be provided to supplement the existing ultrasound product catalog. This is also an important revenue growth point in the future

(5) Wanliyun’s revenue was basically flat, and net profit was a loss. This business may not be as optimistic as imagined.

5. About centralized procurement. “In 2021, the centralized procurement of large-scale medical imaging equipment will be piloted in some provinces and cities. The importers will participate in the bidding and procurement and some products will win the bid, and will carry out comprehensive cooperation with domestic manufacturers in terms of brand, product function, performance, price, service, etc. Competition. It is expected that the centralized procurement model of large-scale medical equipment will be promoted nationwide in the future, and domestic manufacturers should speed up the upgrading and transformation of technology and products to quickly establish a competitive advantage.”

Personally, I think that large-scale medical equipment will be significantly different from ordinary centralized procurement of medicines and consumables. Under the centralized procurement mode, the proportion of direct sales by large medical equipment manufacturers will increase, and sales expenses will drop significantly, which is expected to have a certain impact on net profit, but it will not be as big as drugs and consumables.

6. The gross profit margin of sales was 46%, a year-on-year decrease of 6%, which was comparable to that of 2019, but continued to decline. With the trend of localization substitution, it is expected that the competition will be more intense, the gross profit margin will further decline, and finally a balance will be reached.

7. If you exclude the abnormal surge in DR sales in 2020 due to the epidemic, the revenue in 2021 will increase by 18% compared with 2019, which is also considered excellent. Compared with the previous years, the revenue has reached a higher level. The market share of major products remained stable or increased. In the next few years, MRI, DSA, CT, color Doppler ultrasound and other products will continue to exert force and achieve rapid growth. As for profits, there is basically nothing to see in the next three years. The substantial increase in R&D and sales expenses will put a lot of pressure on the profit side, but it will not cause losses. According to the equity incentive plan just released, revenue will also achieve rapid growth in 2022-2024, and the future can be expected. At present, Wandong Medical is still at the starting point of a new stage. The goal is lofty and the future is bright, but its own strength is still weak and strong enemies are around, and the road is not destined to be easy. Xiongguan Mandao is really like iron, and now it is more and more from the beginning.

8. Comment on the current stock price of Wandong Medical in one sentence: don’t panic, don’t be blindly optimistic, and don’t worry.

$Wandong Medical(SH600055)$ @Today’s topic

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