Yingke medical: performance explosion, radical expansion, but hidden worries

Since the outbreak, the demand for disposable protective gloves of Yingke medical (300677. SZ) has surged, and the company’s performance has broken out. According to the statistics of wind, since the beginning of 2020, the growth rate of British Medical range has reached 1589.11%, which is rare in the whole A-share market. < p > < p > under this favorable situation, British medical plans to expand production on a large scale, with a sharp increase in capital demand, and recently announced plans to list in Hong Kong. By the end of the first half of 2020, the annual total production capacity of Yingke medical disposable protective gloves will exceed 22 billion. With the production capacity under construction and planned expansion, the total production capacity of gloves will jump to nearly 250 billion after being put into operation, and the total investment to launch the production expansion plan since the epidemic will exceed 10 billion yuan. However, as the epidemic is coming to an end, combined with Founder Securities’ forecast of global demand for major glove products, it is worrying whether Yingke medical can digest the large-scale production capacity, and investors may pay for the corresponding risks. < p > < p > Yingke medical is a comprehensive supplier of medical care products, including disposable gloves, wheelchairs, cold and hot compress, electrode pieces and other products. In the first three quarters of 2020, the company realized an operating revenue of 8.945 billion yuan and a net profit of 4.373 billion yuan, with a year-on-year increase of 486.44% and 3376.72% respectively. After the outbreak of

COVID-19, the demand for disposable protective gloves has increased sharply. The price of Ying Ke medical disposable protective gloves has greatly increased, and sales revenue and gross profit margin have been greatly improved. In the first half of 2020, Yingke medical achieved an operating revenue of 4.45 billion yuan, of which the sales revenue of medical protection products reached 4.286 billion yuan, accounting for 96.33%, and the gross profit rate also increased to 62.41%, with a year-on-year increase of 352.09%, 413.94%, 16.45% and 38.55% respectively. < / P > < p > before the outbreak of the epidemic, although the sales revenue of medical protective equipment of British Medical accounted for more than 80%, the annual revenue scale of this business was only more than 1 billion yuan, and the gross profit rate was about 25%. From 2017 to 2019, the operating revenue of Yingke medical was 1.750 billion yuan, 1.893 billion yuan and 2.083 billion yuan respectively, of which the sales revenue of medical protection products (including disposable PVC gloves, Disposable Nitrile Gloves and other protection products) was 1.490 billion yuan, 1.604 billion yuan and 1.769 billion yuan respectively, with gross profit rate of 25.49%, 25.27% and 24.80%. Yingke medical under the epidemic situation is totally different from before. Moreover, compared with the listed companies in the same industry, the sales revenue and gross profit rate of medical protection products in the first three quarters of 2020 are better, and the company has achieved “corner overtaking” at this special time point of epidemic situation. < p > < p > in this case, the share price of British Medical rose sharply, from 11 yuan / share at the beginning of 2020 to 188.58 yuan / share on January 6, 2021, with a maximum increase of 16 times and a total market value of 66.2 billion yuan. < p > < p > on May 12, 2020, Yingke medical released the plan for non-public issuance of a shares. The listed company plans to raise no more than 500 million yuan from Liu Fangyi, the controlling shareholder and actual controller. It plans to invest 240 million yuan in the project of “annual output of 6.184 billion (6.184 million cases) high-end medical gloves” and supplement 260 million yuan in working capital. < / P > < p > however, the price of this additional issue is only 28.71 yuan / share, far lower than the closing price (former recovery rights) of 188 yuan / share of Yingke medical on January 6. After the issuance, the actual controller Liu Fangyi’s shareholding in the company increased from 37.08% to 40.10%. Meanwhile, the earnings per share of other shareholders were diluted accordingly, which is a kind of damage to the interests of small and medium shareholders. < / P > < p > although the pricing of the above additional issuance is in line with the new regulations on refinancing, under the premise of the sharp rise of the company’s share price, the 20% discount pricing further enables the actual controller of the company to easily obtain a floating profit of more than 2.2 billion yuan at a lower cost (based on the share price on December 17, 2020), and the actual controller of Yingke medical has actually obtained the “double dividend” of the sharp rise of the share price and the loosening of the refinancing The outside world suspects that this is an opportunity to deliver benefits. < / P > < p > British Medical was listed on the gem in July 2017. According to the prospectus, in 2016, the company’s PVC glove production capacity was 5.602 billion and nitrile glove production capacity was 2.090 billion, only 7.692 billion in total. The company’s IPO raised investment project “an annual output of 5.88 billion (5.88 million boxes) high-end medical gloves project” was subsequently completed, and the company’s production capacity increased significantly. < / P > < p > shortly after listing, British Medical launched a further expansion plan. On October 25, 2017, Yingke medical announced that the company plans to invest 1.38 billion yuan in Suixi County, Anhui Province to build “28 billion pieces (28 million boxes) of high-end medical gloves per year” (11.08 billion pieces (11.08 million boxes) of high-end medical gloves per year raised by issuing 470 million yuan convertible bonds in August 2019) and “6.184 billion pieces (6.184 million boxes) of high-end medical gloves per year raised by increasing 500 million yuan in December 2020) “Glove project” is part of the above project planning. According to the semi annual report, the listed company announced that it plans to invest 140 million US dollars in the construction of “an annual output of 8.82 billion (8.82 million boxes) high-end medical gloves and other medical consumables project” in Vietnam, with a construction period of 29 months. < p > < p > on March 13, 2020, the company announced that it plans to build a “high-end medical gloves project with an annual output of 27.168 billion pieces (27.44 million boxes)” in Pengze, Jiangxi Province, with a total investment of 3 billion yuan. < / P > < p > on April 15, 2020, the company said that due to the development of foreign epidemic situation, the demand for disposable gloves in foreign markets increased. The original expansion project of Anhui Yingke with an annual output of 9.88 billion (9.88 million cases) high-end medical gloves was changed to “Yingke medical protective products industrial park project”, and the investment was expanded to 2.276 billion yuan. After completion and operation, the annual output of 21 billion (21 million cases) high-end medical gloves will be achieved The production scale of medical gloves; the planned start time is 2020, and the planned completion time is 2023. According to the announcement on August 24, 2020, the company plans to expand the production of the original project (16 billion pieces (16 million boxes) of high-end medical gloves project) in Huaining, Anhui Province to “40 billion pieces (40 million boxes) of high-end medical gloves project”, and expand the investment to 4 billion yuan. On September 2, 2020, the company announced that it plans to implement an annual output of 40 billion pieces (40 million boxes) of high-end medical gloves project in Linxiang City, Hunan Province. The announcement on December 1, 2020 shows that the company plans to invest in the construction of an annual output of 5 billion TPE gloves and 5 billion CPE gloves project in Yiyuan County, with a total investment of US $120 million. < p > < p > on the same day, the company also said that the subsidiary Shandong Yingke plans to invest 700 million yuan in Qingzhou City to build the “annual output of 50 billion pieces (50 million boxes) of high-end medical protective gloves of nitrile and PVC” (phase I project), with a total investment of 5 billion yuan from 2021 to 2022, and a planned investment of 253 million yuan to build the annual output of 3.3 billion pieces of high-end medical protective gloves of nitrile from 2021 to 2022 . On December 30, 2020, the company announced that it plans to invest in the construction of an annual output of 13.1 billion (13.1 million boxes) PVC high-end medical gloves project in Xiayi County, with a total investment of 660 million yuan. < / P > < p > from the perspective of production expansion plan, the implementation locations of the above projects are different, and there is no overlap. It can be seen from the above that the existing production capacity of Yingke medical gloves products, together with the capacity under construction and the capacity to be expanded, the total production capacity of disposable gloves will reach 246.14 billion; the total investment to launch the production expansion plan from 2020 will exceed 10 billion yuan. In addition to IPO projects, the company’s total investment in various projects exceeded 20 billion yuan. However, as of June 30, 2020, the annual total production capacity of Yingke medical gloves is only over 22 billion, including PVC gloves more than 14 billion and nitrile gloves more than 8 billion. < / P > < p > according to Founder Securities Research Report, the global demand for latex + nitrile gloves and PVC gloves in 2019 is 353 billion, an increase of 9.43% year on year. According to the forecast of Founder Securities, from 2020 to 2024, the global demand for main gloves products is predicted to be 418.6 billion, 473.4 billion, 531.1 billion, 589.1 billion and 653.7 billion respectively, with a year-on-year growth of 18.58%, 13.09%, 12.18%, 10.93% and 10.96%; the total annual production capacity of global protective gloves industry leaders is 56.8 billion, 65.9 billion, 58.6 billion, 58.8 billion and 50.6 billion. The demand growth of latex + nitrile + PVC gloves was 65.6 billion, 54.8 billion, 57.7 billion, 58.1 billion and 64.6 billion respectively. Considering that it will take about one year for the design capacity to be fully put into operation, and the capacity utilization rate may not be kept at 100%, the production expansion plan of leading enterprises matches the global demand growth of main gloves. < p > < p > according to the company’s announced production expansion plan, the production capacity of Yingke medical in 2020-2024 will be 28 billion, 48 billion, 66 billion, 88 billion and 100 billion respectively. < / P > < p > that is to say, under this forecast, the supply and demand of the industry just match. However, after the publication of Founder Securities Research Report, Yingke medical further increased the production expansion plan of about 140.4 billion disposable gloves. If these capacities are put into operation in recent years and the capacity of Yingke medical is greatly increased, does it mean that the demand of the industry is far greater than the supply, and will there be a serious overcapacity of Yingke medical? < / P > < p > with the launch of the new crown vaccine, the epidemic is coming to an end. After the end of the epidemic, can the demand for medical gloves continue to grow as predicted by the research report? < / P > < p > If Yingke medical expands its production capacity as planned in recent years, according to the prediction of Founder Securities, the production capacity of the company will be largely idle. In addition, with the gradual improvement of the epidemic situation, it is inevitable that the prices of protective equipment and gross profit rate will fall, and subsequent investors may pay for the risk. < / P > < p > Disclaimer: the purpose of this article reprinted by CNFC is to convey more information, and it does not represent the opinions and positions of CNFC. The content of this article is for reference only, and does not constitute an investment proposal. Investors operate on this basis at their own risk. < p > < p > Chinanet is a state key news website under the leadership of the Information Office of the State Council and the management of China foreign language publishing and Distribution Bureau. Through 11 versions in 10 languages, the website publishes information 24 hours a day. It is an important window for China to carry out international communication and information exchange.