McGrady Technology (603990) Third Quarterly Report Review: Steady Third-Quarter Performance Layout Assists Reproductive Blue Ocean Market
Event: The company announced the third quarter of 2019: the company achieved revenue in the first three quarters of 20191.78 ppm, an increase of 10 in ten years.95%, net profit attributable to the mother is 10.86 million 无锡夜网 yuan, a decrease of 4 per year.92%, deducting non-attribution net profit 3.83 million yuan, a decrease of 43.03%.  Key points of investment: The gross profit margin has been slightly reduced, and the expenses are well controlled.The company’s gross profit margin in the first three quarters of 2019 was 74.08%, a decrease of 0 per year.93 points.The company’s expenses were well controlled in the first three quarters, and the overall expense ratio was 76.25%, down by 1 every year.90pct, of which the selling expense ratio is 28.77%, rising by 0 every year.45 points; management expense ratio 21.30%, down by 1 every year.13pct; R & D expense ratio 24.78%, a decrease of 0 per year.56 points.In the first three quarters, the company’s other income was 20.29 million yuan, an increase of 27 every year.73%, the main source of the company’s other income is the replacement of tax refunds for software products.  Acquired Haikou Mary Hospital, and deployed assisted reproduction.The company announced on September 27, 2019 that it plans to use cash of RMB 3886.20,000 yuan to acquire 51% equity of Haikou Mary Hospital Co., Ltd. This acquisition was completed on October 22.The main technical strength of Haikou Mary Hospital is reflected in the three fields of reproductive medicine, gynecology and andrology.According to the company’s announcement, in 2018 Mary Hospital’s revenue was 30.16 million yuan, with a net profit of 5.08 million yuan. The committed net profit for 2019-2021 was 5.1 million yuan, 6.88 million yuan, and 7.2 million yuan.  The market for assisted reproduction is vast.The assisted reproductive market is a new blue ocean in the medical field in recent years. Data from the China Population Association show that the national infertility rate has reached 12.5% -15%, infertility population exceeds 40 million.According to the data of Hong Kong stocks Jinxin Xinxin’s recruitment of equity capital, the size of the assisted reproductive market in 2018 has reached 252 trillion, and it is expected to reach about 50 billion US dollars in 2023, with a compound annual growth of 14%.5%.On the supply side, the conventional assisted reproductive services market has relatively high entry-level organisms. Medical institutions receiving reproductive center licenses face extremely high requirements and replacement cycles. Until 2017, there were 451 reproductive centers, of which only 41 were private medical.As one of the only 7 assisted reproductive institutions in Hainan, Mary Hospital is only scarce.  Earnings forecast and investment rating: Maintain “Buy” rating.We believe that the company is the leader of clinical specialist informatization, and its products are constantly 北京夜生活网 developing. The acquired Mary Hospital is almost scarce, and assisted reproduction has broad development prospects and market space.We estimate that the company’s EPS for 2019-2021 will be 0.63/0.85/1.10 yuan, corresponding to the current expected PE is 56/42/32 times, maintain “Buy” rating.  Risk reminders: 1) Risks that the performance of Haikou Mary Hospital is less than expected; 2) Risks that the assisted reproductive market is developing less than expected; 3) Systemic risks.