On the evening of October 15, 2021, Yingke Medical (SZ 300677) issued a performance forecast, and it is expected that the net profit attributable to shareholders of listed companies in the first three quarters of 2021 will be about 6.779 billion yuan to 6.979 billion yuan, an increase of 55.03% to 59.6% year-on-year, and the performance growth in the first three quarters is mainly attributed to the fact that the new coronavirus epidemic is still continuing, and the demand for disposable nitrile protective gloves at home and abroad is still strong.
However, in the third quarter of 2021, due to the gradual control of the new pneumonia epidemic in many countries, and the market has new disposable glove production capacity, and affected by raw material price fluctuations, the price of glove products has declined, resulting in a year-on-year decline in profits in the third quarter of 2021. This can't help but make some investors who pay attention to the disposable glove track wonder, is the glory of the domestic disposable glove industry really going to become a thing of the past?
In fact, on the contrary, the epidemic has brought about a sharp rise in the price of disposable gloves, but also the pattern of disposable gloves in the world reshuffled, in China, the disposable glove industry leaders represented by Yingke Medical have seized the opportunity, turned the target to the world, and went to the international stage as China's advanced high-tech medical device manufacturing enterprises.
In the post-epidemic era, the global market battle for disposable gloves has quietly begun.
The men who landed on Forbes by making disposable gloves
In the 2021 Forbes Global Rich List, there are three richest people on the list, namely Liu Fangyi from China, Lin Weicai from Malaysia, Guan Jin'an and his family from Malaysia, who have been on the list, seeing the common point, that is, these three rich people have made their fortunes by producing disposable gloves, and they are veritable glove tycoons.
Before the epidemic, Southeast Asia was the main production base of disposable gloves in the world, and the climate in Southeast Asia belonged to the tropical rainforest climate and tropical monsoon climate, with high temperature and rain throughout the year, which was very suitable for the growth of rubber trees. As a result, almost all of the world's largest suppliers of disposable gloves are concentrated in countries such as Malaysia.
According to the Malaysian Glove Industry Association, the annualized production capacity of rubber gloves in Malaysia accounted for about 63% of the annualized production capacity of rubber gloves in the world in 2019, and about 10% in China. He Tejia, the world's largest nitrile glove producer, estimates that by 2021, Chinese producers will account for 16% of the world's disposable glove supply, while Malaysia dominates with a 67% share. Kwan Tak Kah Group CEO Kwan Ming Believes Malaysia has a complete disposable glove ecosystem, with a total of 400 companies supporting the glove ecosystem, supported by a variety of industries and services, and with engineering expertise to support the glove industry.
Among the top glove producers in Malaysia, Hartalega and Top Gloves (TOPglove) are two companies.
In 1988, He Tejia was founded in Malaysia, and the founder, Kwan Kam An, is currently the Executive Chairman of He Te Jia. As of press time, according to the official website of Hetejia, Hetejia currently has 8548 employees, has the fastest production line in the industry, produces more than 45,000 gloves per hour, and has an annualized production capacity of 44 billion.
Founder and Executive Chairman of He Tejia Kwan Kam An
The most eye-catching thing about Hetejia is their R&D capabilities, and in terms of R&D innovation, Hetejia has many patented products. For example, in 2005, He Tejia invented lightweight nitrile gloves, which are a flat substitute for latex gloves, which led to an essential change in the global disposable glove pattern, and global demand shifted from latex gloves to nitrile gloves.
In the production of nitrile gloves, HeTejia has its own unique technology, while Hetejia has other high-tech glove patents, such as the FindMe metal detectable gloves launched in 2019, the launch of Amger antibacterial gloves in 2017, the introduction of BDG biodegradable gloves in 2015, etc. With strong research and development capabilities and product capabilities, Hetejia's quality in the industry is obvious to all, before the epidemic, Hetejia's gross profit margin was higher than that of top gloves for many years by about 5%-10%.
However, it is precisely because of the invention of nitrile gloves that China's disposable glove industry can completely break away from the geographical restrictions of raw material latex, laying a raw material foundation for the future development of China's disposable glove manufacturers.
Founded in 1991 and headquartered in Malaysia, Top Gloves is currently the world's largest glove manufacturer. As the name suggests, the glove business is the primary revenue of Top Gloves, which accounts for 99.4% of Top Gloves' revenue according to Top Gloves' fiscal 2020 financial report. Top Gloves official website data show that in the past 20 years, the top gloves compound annual growth rate of 27%, as of now, top gloves have occupied 26% of the global rubber glove market share, employing 22,000 employees, through 50 factories, 812 production lines, the annual production of nearly 100 billion disposable gloves.
The founder of top gloves, Lin Weicai, is known as the "glove king", can also speak fluent Malaysian Mandarin, because his family engaged in the rubber trade, he was born with rubber quite a relationship.
In 1982, He graduated from the University of Malaysia with a Bachelor of Science (Hons) degree in Physics, and later went to the United States for further studies, where he obtained a Master of Business Administration degree from Surros State University. After graduation, Lin Wei returned to Malaysia to work as a sales manager in a company. A few years later, Lin Weicai foresaw the huge potential of the medical glove industry, created the top gloves, the initial stage of entrepreneurship was difficult, Lin Weicai's money was only enough to establish a small factory with only one production line, looking back on that year, Lin Weicai himself may not dare to believe that this small factory will become the world's largest glove manufacturer in the future.
Top Glove founder Lin Weicai
Before the epidemic, Guan Jin'an and Lin Weicai would never have imagined that their business map would be hit by disposable glove manufacturers from China, and another "glove king" - Liu Fangyi appeared in China.
Two years before the establishment of top gloves, The Chinese boy Liu Fangyi was not as weak as the year of the weak crown, and at this moment he was studying electrical engineering at the University of California, Irvine, and Liu Fangyi, who was still a student, had already shown amazing business talent.
Liu Fangyi, founder and chairman of Yingke Medical
At that time, Europe and the United States were experiencing an AIDS outbreak, which led to a shortage of medical gloves in various countries, Liu Fangyi saw the business opportunity, and started a part-time job selling gloves during his studies, resulting in a profit of $8,000 in the first month alone. At that time, this money was already a huge amount of money, and Liu Fangyi resolutely set up a trading company abroad and started transnational trade.
After accumulating the original capital, Liu Fangyi returned to China to start investing, and gradually entered the field of medical device manufacturing, and 20 years later, Liu Fangyi established Yingke Medical in Zibo, Shandong. The legend of the Chinese glove tycoon officially began from this moment.
How legendary is the story of Yingke Medical and its chairman Liu Fangyi? To use a poem to describe it, it is precisely:
Asagiri Tianshelang,
Twilight Heavenly Son's Hall,
Will be the phase of the book without species,
Boys should be self-reliant.
According to public information, Yingke Medical was founded in 2009 and is headquartered in Zibo. When it was first founded, Yingke Medical had only one production base and one production line, and at the beginning a glove only made a few cents. However, Yingke Medical continued to increase capital and expand production, and in the next time successively added a number of production bases such as Qingzhou in Shandong, Huaibei in Anhui, Jiujiang in Jiangxi, and was listed on the A-share GEM in 2017. As of 2020, Yingke Medical has grown into a giant company with revenue of 13.8 billion yuan and net profit of 7 billion yuan, and its business scope covers three major sectors: health protection, rehabilitation nursing and other products. In the same year, the net profit of Blue Sail Medical, the first share of gloves listed in 2010, was only 1.75 billion.
The new crown pneumonia epidemic in China was quickly controlled under the leadership of the Chinese people's government and the Party Central Committee, and the people resumed normal production and life. However, the performance of Yingke Medical continued to rise wildly, and in the first half of 2021, Yingke Medical's revenue reached 10.6 billion, and in only half a year, the revenue reached 80% of the previous year's revenue. Yingke Medical seemed to have released a rocket, shocking the industry, including Malaysia.
Looking back at China's Liu Fangyi and Marasi's Lin Weicai, it can be seen that the two glove tycoons have too many similarities, they are all academics, and they are all studying in the United States, they have done sales, they have top business insights, they all started their own glove factories because they foresaw the huge potential of the medical glove industry, they are all small people counterattacking, starting from a small factory, and gradually becoming a giant in the disposable glove industry.
Disposable gloves are daily medical protective materials, daily demand is large, there is a vast market, but it is not easy to enter a piece of the pie, seemingly small gloves, in fact, there is a very deep moat.
Disposable gloves on the market can be divided into rubber gloves and plastic gloves according to the main material. Among them, rubber gloves refer to latex gloves and nitrile gloves, and plastic gloves refer to PVC, PE, CPE, TPE, etc.
PVC gloves production raw materials are mainly petrochemical products PVC, thanks to China's petrochemical industry chain advantages, PVC gloves production costs are low, the price is more inexpensive, the firmness is much higher than the latex gloves, the range of uses is wider. Today, China accounts for more than 95% of the global PVC glove market. According to Data from China Customs, PVC gloves exported 369.27 million tons in 2019. Even if the production cost of PVC gloves is low, the cost of a production line of PVC two-hand molds is about 8 million.
If it is a nitrile glove two-hand mold production line, it costs 20-25 million. An industry insider calculated the account, now if you want to open a glove factory, the production line according to the use, size and color of the collocation, a workshop at least 8-10 production lines, a production base generally multiple workshops, conversion down, need 1 billion to 5 billion yuan to start. From land planning to production line commissioning to production, it takes 12 to 18 months.
Lin Weicai once said that the glove industry is a fully competitive industry, and there have been more than 250 glove factories in Malaysia, and there are currently about 50. At present, gloves are in high demand, and it is natural for new companies to enter the market. However, in the context of global competition, 90% of factories will not do well in up to 3-5 years.
It can be seen that the production of disposable gloves requires the accumulation of investment in the early stage of the plant and very strong financial support. This fertile land that has been reclaimed is that some people want to enter, and they must also cross the threshold of funds, technology, channels, time and other dimensions. The pattern of the disposable glove market will reflect the Matthew effect of small manufacturers out and strong Hengqiang in the future.
At present, the top three domestic disposable glove manufacturers are Yingke Medical, Lanfan Medical, and Zhonghong Medical, with an annualized production capacity of 75 billion yuan, revenue of 13.8 billion yuan and net profit of 7 billion yuan in 2019, far away from the other two, sitting firmly on the throne of the first place in China's disposable glove industry.
Liu Fangyi did not stop here, the announcement shows that the overall goal of Yingke Medical's expansion is more than 30% of the global market share, which means that Yingke Medical will compete with Malaysian glove manufacturers for the global market next.
Global competition and counterattacks from the Malaysian glove giants
Yingke Medical Board Secretary in the interactive easy reply to shareholders, the current disposable glove annual production capacity has reached 75 billion, according to the announcement, only when the two high-end medical glove projects in Pengze County, Jiujiang City, Jiangxi Province, can bring about 70 billion annualized production capacity, Hunan, Henan, Vietnam production bases are also on the agenda, Yingke Medical is stepping up the global layout.
Liu Fangyi, Lin Weicai, Guan Jin'an, three disposable glove giants have all stated a point of view, that is, the disposable glove market will still be an incremental market in the future, and there will still be no demand in the market in the next few years. They are optimistic about the company's future performance and have strong confidence in the long-term stock price.
Top gloves predict that after the epidemic in 2020, the demand growth rate of the disposable glove industry will increase from 8%-10% to about 12%-15%, and Lin Weicai believes that the demand may still grow by at least 5% after the epidemic is completely over. Frost & Sullivan's report data shows that in 2025, global disposable glove sales will increase from 785.8 billion in 2021 to 1210.3 billion in 2025, with a compound annual growth rate of 11.4%.
To this day, the three giants are still in full swing to expand production and compete for the international market, as Lin Weicai said in an interview, the thin field is not cultivated, and the cultivation is contested.
Faced with the challenge of glove manufacturers from China, will the giant disposable glove production in Malaysia be unaware?
Hetejia estimates that by 2021, Chinese manufacturers will account for 16% of global supply, while Malaysia will still dominate with a share of 67%, while by 2022 Malaysia's market share will be reduced to 60%, while China's global glove supply market share will increase to 23%. On 8 September 2021, the Kuala Lumpur newspaper headlined, "Malaysia's global leader in the glove industry is facing fierce competition from China. ”
Guan Liangming said that in the short term, he did not think that Malaysia would lose its dominance in the glove market, and he disclosed that the expansion capacity announced from China showed that in 2019 and 2022, China or increase production capacity by 59% to 136 billion gloves, and Malaysia will increase production capacity by 20% to 223 billion during the period.
But guan also described Chinese producers as "a force to be reckoned with", arguing that the local glove industry should recognize China's competitiveness in the ecosystem.
On September 15, 2020, Guan Jinan said at the shareholders' meeting that rubber gloves will still be in short supply in the next 3 years, and it is not known whether He Tejia will add 120 billion gloves in the next 3 years, which may not be enough. As of press time, He Tejia has set himself the goal of expanding the annualized production capacity to 95 billion.
According to an investment report of top gloves, top gloves plan to add 51 new production lines in 2021, which can produce an additional 15 billion gloves per year, and it is expected that by the end of 2021, top gloves can reach an annualized production capacity of 111 billion gloves, while top gloves plan to add 118 two-hand mold production lines in 2022, and the output can increase by 35 billion gloves, reaching an annualized production capacity of 146 billion gloves.
At present, Top Gloves has 47 factories, and Top Gloves plans to have 43 glove factories in 2022 and 47 glove factories in 2024, with an annualized production capacity of 205 billion gloves.
According to the announcement of Yingke Medical, Yingke Medical expects to have an annualized production capacity of more than 120 billion yuan in 2022 and an annualized production capacity of more than 300 billion yuan in 2025. The goal is to increase its global market share to 30%. Not only is it already the leader in China's disposable glove manufacturers, but also the leader of disposable gloves in the world, a Yingke medical executive revealed that this is the future strategic goal of Yingke Medical.
The three giants of the disposable glove industry are still optimistic about the market of disposable gloves and are willing to invest huge amounts of real money and silver to expand production, and the Malaysian disposable glove giants are becoming more aware of the challenges of Chinese manufacturers, can Yingke Medical catch up with or even surpass the Malaysian glove giants in just a few years and win the world's first market share?
Yingke Medical has advantages over the other two
It is easier said than done, Yingke Medical will increase its annualized production capacity by four times in three or four years, and obtain a global market share of 30%, compared with top gloves and He Tejia, what advantages does Yingke Medical have to ensure that its plan is carried out as scheduled?
1. Due to the different proportion of production models, Yingke Medical has more channel advantages
Top gloves, He Tejia mainly use OEM model customer OEM, Yingke Medical adopts the OBM model (Orignal Brand Manufactuce, original brand manufacturer), on the one hand, to sell products under customer brands, on the other hand, to sell their own products with their own brands "Intco" and "Basic".
According to Hetejia data, Asia is the third largest market after Europe and the Americas.
Frost & Sullivan data show that in 2020, among the countries with per capita disposable glove use in the world, the United States has 300, Hong Kong has 276, Japan has 133, China has 9, and China with a population of 1.3 billion. Accessing the Chinese market, there is no doubt that Yingke Medical has unique advantages in terms of policy support, trade barriers, and cultural differences.
Since the outbreak of the new crown pneumonia epidemic, Yingke Medical has attracted a large number of new customers, including many first-hand channels, such as hospitals, factories, etc., which has led to rapid growth in sales of Yingke Medical's own brand products. Before the epidemic, Yingke Medical's own brands were mainly sold to China, according to the financial report, Yingke Medical's domestic revenue rose from 5.45% in 2019 to 23.7% in 2020, the gross profit margin in China was as high as 74.8% in the same period, the overseas gross profit margin was 67.24%, and the domestic gross profit margin was 7.56 percentage higher than that of foreign countries.
The advantage of the OBM model is that it can reduce intermediate links, improve gross profit margin and increase market competitiveness, and its own brand can bring a certain brand premium in the long run, which is more profitable than simple OEM.
Through interviews with in-house executives of Yingke Medical, it can be learned that at present, Yingke Medical OBM accounts for 40%-50%, top glove OEM business accounts for 92%, and OBM accounts for 8%. It can be seen that Yingke Medical's OBM has greater advantages in the future and is more suitable for the Chinese market.
2. In terms of cost control, Yingke Medical relies on its advantages.
Yingke Medical through scientific management, in multiple dimensions at the same time to optimize the cost, according to the Yingke medical announcement, Yingke medical costs mainly include raw materials, energy consumption, labor, depreciation, manufacturing costs, etc., Yingke medical layout raw materials and energy, through the form of self-built latex plant, raw material costs can be reduced by 10%, through cogeneration and other ways, energy consumption costs can be reduced by 20%. At present, if the project is singlely dismantled, some production parts are replaced by self-production, which will save tens of millions of dollars in costs a year.
In terms of manufacturing costs, Yingke Medical, top gloves, He Tejia are reducing labor costs through automation and digitalization, Yingke Medical is rapidly promoting the unmanned production of gloves, and will significantly reduce labor expenditure in the future, Yingke Medical is about to achieve a fully modern production line in Pengze production base, and can refer to He Tejia in terms of cost reduction, Guan Liang revealed that in the future, through digitalization, the total number of employees will be reduced by 17%-20%.
According to the announcement of Yingke Medical, the production line technology of Yingke Medical has been iterated to the third generation, and the advanced nature, automation degree and cost control ability of technical equipment have reached the industry-leading level in the world. Liu Fangyi previously said in an interview, "Yingke Medical has created the world's first profit with the world's fifth-largest glove production capacity, which is not unrelated to its use of advanced production capacity." 80% of our production capacity is the most advanced capacity in the world, and the advanced production capacity of top gloves accounts for only 20%. ”
According to the author's analysis of the financial reports of the three companies: the net profit margin of Yingke Medical in 2020 is as high as 50.64%, and the net profit margin in the first half of 2021 is further increased to 55.47%, and through comparison, the net interest rate of top gloves in fiscal 2021 is 48.68%, and the net interest rate of Hetejia is 43%. The gross profit margin of Yingke Medical in 2020 was 60.45%, and the gross profit margin in the first half of 2021 further increased to 66.35%, while the gross profit margin of top gloves in fiscal 2021 was 60.45%, and the gross profit margin of Hetejia was 67.85%.
Through the comparison of the above data, it can be found that from 2020 to 2021, the gross profit margin and net profit margin of Yingke Medical will further improve, thanks to the increase in production capacity and cost optimization of Yingke Medical.
An industry insider revealed that the production line of Yingke Medical is mostly a modern production line with a large investment after 2012, mainly based on the two-hand mold automation production line, different from the old production line, compared to the old production line, can improve the gross profit margin, most of the equipment of Yingke Medical is new, better than the backward equipment in the early days of top gloves.
At the media communication meeting for the fourth anniversary of Yingke, Liu Fangyi said: "At present, from the perspective of the whole industry, whether it is the accumulation of technology or the understanding of technology, we are far higher than our peers, including the research and development of production lines. ”
3. Domestic labor costs and stable epidemic control
From the perspective of epidemic control, China has long controlled the epidemic, and the production of domestic enterprises has not been affected by the epidemic, while the epidemic in Malaysia is still continuing. According to CCTV news, the Malaysian Ministry of Health released the new crown epidemic data on the evening of October 11, local time, showing that in the past 24 hours, there were 6,709 new confirmed cases of new coronary pneumonia in Malaysia, with a cumulative total of 2346303 confirmed cases. According to Xinhua News Agency, at the end of November 2020, the epidemic caused more than 2,000 workers in top gloves to be diagnosed with new crown, which led to the closure of 28 factories in top gloves.
From the perspective of labor costs, China has a population of 1.4 billion, while Malaysia mainly relies on foreign workers, resulting in high labor costs, while Malaysia's domestic labor problems are serious, according to Reuters, the disposable gloves produced by top gloves are identified by the US government as involved in "forced labor". U.S. Customs and Border Protection (CBP) ordered all U.S. ports to confiscate all of these glove products from March 29, 2020 local time, and the ban was lifted on September 10, 2021.
Top Glove's staff dormitories are in a bad environment, with some dormitories for 24 people living together. Yingke Medical is a high-tech manufacturing enterprise that is committed to the research and development, production and marketing of consumables for medical devices, and its factories and dormitories are completed by top architects and designers, using modern design to provide employees with generous remuneration and accommodation environment.
According to the announcement of Yingke Medical, Yingke Medical is rapidly promoting the unmanned production of gloves, and will significantly reduce labor expenditure in the future. More than 80% of The annualized production capacity of Yingke Medical is composed of the third generation, which makes the advanced nature of technology and equipment, the degree of automation and cost control ability reach the industry-leading level in the world.
4. Domestic land advantages and industrialization advantages
Malaysia adopts a private land system, the transaction procedures are cumbersome and complicated, while China adopts the state-owned land system, and the government actively supports Yingke Medical in building factories and obtaining land, which provides conditions for the rapid expansion of Yingke Medical. In terms of raw materials, China is a big manufacturing country, the country has a complete chemical industry chain, raw material supply chain is sufficient, according to the announcement of Yingke Medical, its two latex factories acquired in Shandong Haode and Anhui Kaiser have been officially put into production, and the above two points have provided sufficient long-term development support for Yingke Medical.
Disposable glove industry is chased by capital, the world's three major production giants stepped up the pace of capital increase and expansion, promote the digitization of production lines, in the short and medium term, Malaysia's disposable glove industry still accounts for the world's main share, but China has more advantages in raw materials, land, costs, etc., due to the new crown epidemic led to the pattern of global disposable gloves has been shaken, in the long run, high-tech manufacturing enterprises represented by Yingke Medical have begun to emerge in the world, under the advantages of channels, labor, industrial chain, land, etc. It's easy to catch up.
I wish that more national enterprises in high-tech advanced manufacturing such as Yingke Medical will go to the world stage and let the world witness the style of China's medical device manufacturing industry.