The company announced that it intends to acquire 100% equity of Shandong Xinhai Runbang, with a valuation of 200 million, paid in four years (40%, 20%, 20% and 20%), and the target promises a net profit of not less than 20 million in 2016-2018. 25 million and 31 million.
The synergy effect in Shandong is obvious, and it is expected to increase the depth and breadth of service coverage. Xinhai Runbang has more than ten brands such as BD and Johnson & Johnson in Shandong. Among the service medical institutions, 6 are centralized distribution and more than 50 direct sales. The company also indirectly covers more than 600 medical institutions through more than 300 distribution partners. The acquisition of Xinhai Runbang will significantly compete for the company's coverage in Shandong. Considering Xinhai Runbang's selection of some county-level hospitals as the main direction of its integrated medical consumables distribution business, it is expected to establish a certain number of counties in Shandong in the future. Level hospital channel service platform, which will enhance the company's coverage depth, and the overall synergy is obvious.
Expansion in another place will continue in the next city. The company's whole package business compression and circulation links, the model conforms to the medical reform and hospital interest appeal, and the platform attributes and expandability are strong. We believe that the company's development logic and path can be divided into three stages: 1) expansion in different places, management output to achieve scale effect, and now taking the first step; 2) arranging special products upwards, grafting company terminals can achieve rapid volume, currently Layout chemiluminescence, molecular diagnostics and POCT, etc.; 3) Downward development of third-party services, and cooperation with Golden Domain Testing. We believe that the acquisition will only expand the second single after the company's listing, and the expansion will be continued.
Clearly benefiting from the reform of medical service prices, long-term optimistic. At the beginning of July 2016, the Notice of the Fourth Committee of the National Development and Reform Commission on Printing and Advancing the Price Reform of Medical Service Price clearly stated that while adjusting the price of medical services, the price of large-scale medical equipment inspection and treatment and inspection should be reduced. The original inspection project fees are priced by the government. After clearing the inspection fee, the hospital has reduced the cost of inspection, and clearly identified Runda Medical, which helps to test the control fee through the whole package model. At present, the market space for the mid-stream circulation of the company's business is between 80 million and 90 billion yuan, and the pattern is scattered. As a domestic leader, the market share accounts for less than 3%. Considering that the company is a scarce A-share, it is expected to use the first-mover advantage and capital advantage to integrate the industry.
Earnings forecasts and investment advice. Taking into account the impact of the merger and acquisition, we slightly raised the profit forecast. It is expected that the diluted EPS after 2016-2018 will be 0.44 yuan, 0.61 yuan and 0.77 yuan respectively, corresponding to 60 times, 43 times and 34 times PE after the issuance of diluted shares. Under the background of the reform of medical service prices, the company's whole package business conforms to the trend of national medical reform and hospital appeals. It is the clear target of benefit under the current medical reform environment. We are firmly optimistic about the long-term development of the company. At the same time, taking into account the company's fixed increase, the large shareholder's large proportion of holdings and the employee's shareholding firm will not adjust the price to demonstrate future development confidence, and there will be continued expansion expectations in the future. We maintain the “Buy†rating.
Risk Warning: Off-site expansion is lower than expected risk; working capital shortage risk; additional issuance is less than expected risk; and the performance commitment of the M&A target is not up to the expected risk.
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