In recent years, affected by public health events, the performance of domestic medical enterprises has increased sporadically. However, as the incident faded away, the relevant companies soon ushered in a period of adjustment of their business structure. As for how to return to rational values smoothly in the future, or the common problems faced by enterprises in the industry.
On May 10, Robust Medical (300888. SZ) released an announcement on the convening of the 2023 results briefing and the main contents, in which the company's management gave detailed answers to the questions that investors are concerned about.
In 2023, under the unfavorable situation of the high base of infection protection products in the previous year and the significant decline in market demand in that year, the company achieved operating income of 8.185 billion yuan, net profit attributable to the parent company of 580 million yuan, and non-net profit of 412 million yuan. Excluding infection prevention products, the operating income of the conventional medical consumables business was 2.95 billion yuan, and the operating income of the consumer goods business was 4.26 billion yuan, an increase of 17.3% and 6.4% year-on-year respectively, especially the operating profit margin of the all-cotton era was 11.4%, and the profitability was significantly improved, reflecting the resilience of the company's long-term development.
At the same time, the first quarter report of 2024 shows that the company achieved operating income of 1.91 billion yuan, net profit attributable to the parent company of 180 million yuan, and net profit margin of 9.6%. It is worth noting that the sales of conventional medical consumables increased by 4.3% year-on-year, while the sales of high-end wound dressings increased by 33.9% year-on-year, showing solid market demand and growth potential.
Judging from the above data, the company obviously answered the answer sheet of how domestic medical companies should return to rational value with high scores.
It is worth mentioning that the company also threw a dividend plan to the market - a cash dividend of 5 yuan (tax included) for every 10 shares. 50% of the net profit is used for cash dividends, which not only demonstrates the confidence of the company's development, but also conveys value to shareholders.
Returning to rational development, the growth of medical fundamentals is steady
In 2023, with the public health incident being fully controlled, the demand for infection protection products in the market will gradually decline, which will affect the company's annual operating income. However, compared with the operating income of 4.575 billion yuan in 2019, the operating income in 2023 has nearly doubled.
In the elimination of infection protection products, as the company's medical business fundamentals - conventional medical consumables continue to develop steadily. The annual operating income of this business reached 2.95 billion yuan, a year-on-year increase of 17.3%. Among them, the traditional dressing business achieved revenue of 1.15 billion yuan, a year-on-year increase of 7.0%; The high-end dressing and operating room consumables business achieved operating income of RMB600 million and RMB560 million respectively, an increase of 27.7% and 17.7% year-on-year respectively.
On the one hand, the growth of the conventional medical consumables business is due to the company's long-term strict control of product quality.
On the other hand, the company has an accurate insight into market demand.
According to the latest data from the National Bureau of Statistics, the population aged 60 and above in mainland China will exceed 296 million in 2023, and it is expected to exceed 400 million by 2035, accounting for more than 30% of the total population, entering a stage of deep aging. The medical consumables industry has a low threshold due to low R&D costs, resulting in many enterprises but generally small scales, uneven quality, and scattered industry patterns. In this context, the company has won the trust of medical institutions and consumers by virtue of its strong brand effect, and enjoys a high product repurchase rate. In this regard, the company said at the performance briefing that the company has always adhered to the brand to lead the future development, and we believe that only by relying on the brand can a company generate a good memory among consumers, which in turn triggers the ability to sustainably repeat repurchase. That's why we prioritize quality over profit and brand over speed as values. In addition to the value of the product itself, we believe that the brand means responsibility, a commitment to the consumer, to the society, to the development of the environment, and we want to have this emotional connection with the outside world.
At the same time, the company's technological innovation is also the key to its continued competitiveness. As of the end of 2023, the company's medical consumables segment holds a total of 883 R&D patents, 367 medical product registration certificates (including 25 registration certificates for three types of medical products), 159 net new R&D patents, and 48 net new medical product registration certificates. It is the company that has sufficient R&D patents and product registration certificates to ensure its market leading position in a variety of core products such as surgical kits, film dressings, oral and nasal cavity, and incontinence care. The sales growth rate of these products exceeded 35%, reflecting the high recognition of the company's high-quality products.
In addition, the company is actively expanding domestic and foreign markets, especially the overseas market of medical consumables business, which will achieve a sales growth of 15.4% in 2023, showing the international competitiveness of Chinese enterprises. The company has also strengthened its online and offline sales channels, covering many medical institutions and pharmacies at home and abroad, so that patients can more easily obtain the medical consumables they need and greatly reduce the treatment burden of patients. As of the end of 2023, the company has covered more than 6,000 domestic hospitals; More than 40,000 OTC pharmacies were added during the year, exceeding 190,000 by the end of the year.
High quality and innovation drive the development of the cotton era
Although the domestic consumption environment was complex and changeable last year, and the downward pressure on the entire consumer market value was greater, the company's "all-cotton era" broke out of the encirclement and achieved contrarian growth. In 2023, Cotton Times will achieve operating income of 4.26 billion yuan, a year-on-year increase of 6.4%. At the same time, benefiting from a number of management measures related to the company's internal operations and product matrix, Cotton Times achieved a gross profit margin of 56.9%, an increase of 3.9 percentage points year-on-year, and an operating profit of 490 million yuan, a year-on-year increase of 24.0%.
In terms of products, the two categories with the highest growth rate in the cotton era are adult clothing and other textile consumer goods, with sales increasing by 21.7% and 17.1% year-on-year respectively. The core explosive dry and wet cotton towels accounted for 27.8% of the revenue of the consumer goods sector, with steady growth, achieving annual revenue of 1.19 billion yuan, a year-on-year increase of 2.8%.
The reason why the cotton era can achieve such results is inseparable from the company's layout of channels.
In terms of online channels, the company has completed the layout of mainstream third-party e-commerce platforms including Tmall, JD.com, Pinduoduo, Vipshop and Amazon, and has also cooperated with social new retail platforms such as Douyin, Kuaishou and Xiaohongshu to ensure the diversification of online channels. In terms of offline channels, as of the end of 2023, Cotton Times has opened 411 offline stores in mid-to-high-end shopping malls in more than 90 key cities across the country, including Shenzhen, Shanghai, Beijing, and Guangzhou, and opened 84 new stores compared with 2022.
For the overall strategy of offline store development, the company said at the results conference that the total plan to open stores in 2024 is about 100, and the franchise model has gradually matured after three years of exploration, and we will promote it in various regions in a planned way, and continue to maintain the rhythm of about 100 stores per year in the next 3-5 years.
More importantly, the company's product reputation and technology research and development are its strong backing.
On the one hand, although the dividends of occasional events ebb and flow, the company's products at critical moments are stably output, leaving people with a deep impression of high quality, high efficiency and large pattern, thus accumulating a large number of customers and channels, as well as brand reputation, laying a solid foundation for the trust of products in the cotton era. At the performance briefing, the company said that due to the company's overall medical background, the products that contribute to the cotton era can bring consumers a safe, comfortable and easy-to-use experience. On the other hand, the company as a whole is a manufacturing enterprise, and the production and manufacturing of consumer products is also used in a medical-grade manufacturing environment. We continue to improve our competitiveness through the improvement of production technology, intelligent manufacturing and digitalization, rather than reducing the quality of raw materials to reduce costs.
On the other hand, the all-cotton era takes "cotton" as the center, focuses on R&D and innovation, and establishes a differentiated and competitive product matrix. The company's first cotton soft towel has opened up a new track, innovatively using cotton materials in the contact part between cotton wipes and cotton surface sanitary napkins and skin to reduce the irritation caused by chemical fiber components.
With the help of technology research and development and high-quality products, the company's core category industry rankings have steadily improved last year, the sell-out rate of infant and adult clothing has reached a new high, the inventory turnover days have decreased significantly, and the efficiency of commodity operation has been significantly improved.
Repurchase, increase holdings, dividends, long-term layout is at the right time
Recently, the State Council issued the "Several Opinions on Strengthening Supervision and Risk Prevention and Promoting the High-quality Development of the Capital Market" (hereinafter referred to as the "New Nine Articles"), which pointed out that the supervision of cash dividends of listed companies will be strengthened. Increase incentives for high-quality companies that pay dividends, and take multiple measures to promote the increase in dividend yields. Enhance the stability, sustainability and predictability of dividends, and promote multiple dividends a year, pre-dividends, and dividends before the Spring Festival.
In line with the principle of repaying shareholders and sharing the company's operating results with shareholders, Wenwen Medical, which actively responded to the call of the new country's nine articles, also threw out a generous dividend plan. According to the profit distribution plan, the company intends to distribute cash dividends of 5 yuan to all shareholders for every 10 shares based on 580 million shares, with a total of 290 million yuan in cash, accounting for 50.3% of the net profit attributable to the parent company in the current period.
In this regard, the company said at the performance briefing that the company will dynamically balance the relationship between shareholders' cash return and investment development: according to the capital needs of the two major businesses, when our investment demand declines, we will expand the proportion of dividends in the net profit attributable to the parent company; When we have better investment opportunities and better returns, we will adjust the dividend ratio. Creating value for shareholders is our goal, and the company will strive to repay shareholders for their support with better performance and more considerable returns.
It is worth mentioning that this is not the first time that the company has paid dividends.
From 2020 to 2022 after listing, the company's cash dividends will reach 770 million yuan, 380 million yuan and 800 million yuan respectively, accounting for 20.2%, 30.5% and 48.3% of the net profit attributable to the parent company in the current period, and the total amount of dividends implemented can reach 1.94 billion yuan, accounting for 54.5% of the net funds raised in the IPO.
In fact, if the pre-dividend in 2023 is included in the calculation, the company has paid dividends to investors for four consecutive years, and the total dividend amount can reach 2.23 billion yuan, and the total amount of deemed dividends is as high as 2.87 billion yuan, accounting for 80.7% of the net funds raised in the IPO.
Not only that, in January this year, the company also announced that within 6 months, directors, deputy general manager and chief financial officer Fang Xiuyuan, director Xu Xiaodan, supervisor Liu Hua, deputy general manager and secretary of the board Chen Huixuan, deputy general manager Zhang Li and other directors, supervisors and senior executives will increase their holdings of the company's shares by a total of 3.15 million yuan to 6.3 million yuan.
The multi-pronged approach of "dividend + repurchase + increase in holdings" not only demonstrates that the management of Win Medical is full of confidence in the company's future development, but also injects a shot of strength into investors to a certain extent. Behind this move, or with the passage of time, the company's development strategy upgrade and the broad prospects of the industry, the company's long-term value has been highlighted, and a number of brokerages have recently given the company a "buy" rating.
Guosheng Securities believes that looking forward to 2024, we estimate that the company's revenue is stable year-on-year/performance is expected to grow rapidly from a low base. At the same time, in 2024, the revenue of consumer goods is expected to grow steadily, and at the same time, the profit margin will be increased by reducing costs and increasing efficiency, which is expected to drive the steady growth of the company's operating profits. It is estimated that the net profit attributable to the parent company in 2024~2026 will be 9.84/11.55/1.321 billion yuan respectively, corresponding to a PE of 18.7 times in 2024, maintaining a "buy" rating.
Southwest Securities believes that it is expected that the company's EPS from 2024 to 2026 will be 1.60 yuan, 1.79 yuan and 2.02 yuan respectively, and the corresponding PE will be 20 times, 18 times and 16 times respectively. Considering that the company's consumer goods are expected to recover steadily, medical consumables are expected to maintain rapid growth in addition to disease control products, and maintain a "buy" rating. (This article was first published on the Titanium Media App, by Zhang Xiaoxia)