Dongfulong book cash is extremely abundant, the main industry to create cash flow ability is strong, there is no need for fixed increase.
This reporter? Du Peng / article
Dongfulong (300171.SZ) is a pharmaceutical equipment listed company, the main products include injectable single machine and system, medical equipment and consumables, purification equipment and engineering, 2020 contributed to the amount of revenue of 1.222 billion yuan, 244 million yuan, 289 million yuan. At present, the company's total market capitalization is around 26 billion yuan.
Recently, Dongfulong announced a fixed increase of 3.2 billion yuan, which will cause a large proportion of dilution of the existing share capital. At present, the company's books are extremely well-funded, without any interest-bearing liabilities, and there is no need for financing to meet capital expenditures. Historically, Dongfulong has been asset-light operation mode, and this fixed-asset increase will make its fixed assets explode close to 9 times, it will be directly reduced to a listed company with heavy assets, and further reduce the listed company's profitability is not high.
The book is not short of money
On March 1, Dongfulong released a non-public offering proposal to raise funds of not more than 3.2 billion yuan, of which 530 million yuan for the biopharmaceutical equipment industry pilot production center project, 990 million yuan for Jiangsu biomedical equipment industrialization base project, 1.25 billion yuan for Hangzhou life science The project of Hangzhou life science industrialization base, 430 million yuan to supplement the working capital.
The fixed-price increase pricing base date for the first day of the issue period, the issue price is not less than 80% of the average price of the company's stock trading in the 20 trading days before the pricing base date. If the closing price of 42.36 yuan/share according to March 8, eighty percent discount issue, this fixed increase need to issue 94.43 million new shares, the current 628 million total share capital of the dilution ratio of 15%. Moreover, since 2022, the market is not good, Dongfulong has fallen 17%, can not rule out the possibility of continuing to fall in the future, the fixed increase on the dilution of the old shareholders' equity may be a greater proportion.
However, Dongfulong is not short of money at all. 2021 September 30, the company's money funds 1.937 billion yuan, trading financial assets 1.713 billion yuan, a total of 3.65 billion yuan, there is no any interest-bearing liabilities.
In addition to the extremely thick cash family, the main business of Dongfulong has continued to create a huge amount of cash flow every year. From the historical data, the company's net operating cash flow has been positive for many years, with net operating cash flow of $446 million, $1.116 billion, and $962 million in 2019-2020 and the first three quarters of 2021, respectively, and the trend of continuing to create cash flow is expected to continue in the future.
It can be seen that Dongfulong can completely use its own funds to meet the needs of capital expenditures, there is no need for fixed capital raising.
From the perspective of past operations, Dongfulong belongs to the asset-light production model, and capital expenditure is not much, and its annual cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets has not exceeded 100 million yuan since its IPO in 2011 until 2020, with only 32.01 million yuan, 14.03 million yuan, and 26.72 million yuan from 2018 to 2020, respectively.2021 On September 30, 2021, the company's fixed assets were only $325 million, accounting for only 3.62% of total assets.
If the fixed-price increase is successful, according to the plan, 3.2 billion yuan of fixed-price increase in most of the funds will be converted to fixed assets. At that time, the total fixed assets of Dongfulong will be directly close to 4 billion yuan, up to about 10 times the current, completely become a listed company with heavy assets. It can be said that the fixed-asset investment program and its light-asset production model is completely different.
Specifically, the fixed-income investment project expenditure mainly includes three parts, namely, construction and safety engineering, equipment purchase and installation, research and development costs, all the fund-raising project of these three parts of the investment amount totaled 2.019 billion yuan, 769 million yuan, 216 million yuan.
It can be seen that the real use of the main business of the purchase and installation of equipment and R & D costs only 985 million yuan, less than one-third of the total amount of fixed-price fund-raising. Most of the rest of the funds are used for construction and safety engineering, which is essentially building. According to the construction cost of 5000 yuan / meter, 2.019 billion yuan can build 403,800 square meters of buildings, for a total of only 2,661 employees listed company is really necessary?
From the historical operation point of view, Dongfulong itself is a listed company whose profitability is not strong.Wind information shows that its deductible-weighted ROE has never exceeded 14% since 2010, and it has been below 3% for three consecutive years from 2017-2019. After the completion of the above fundraising project, the most invested amount of construction and safety engineering simply can not directly produce benefits, will further pull down the listed company's profitability.
High growth is difficult to sustain
Since 2018, Dongfulong's performance has grown at a high rate. The financial report shows that in 2019-2020 and the first three quarters of 2021, the company's year-on-year revenue growth rate is 18.11%, 19.6%, 54.61%, and the year-on-year growth rate of net profit is 106.95%, 217.86%, and 93.69%, respectively.
Along with the high performance growth, Dongfulong stock price is also all the way up, from about 5 yuan in 2018 to the highest in August 2021 hit a record high of 68 yuan / share, the period of the maximum increase of more than 12 times. The total market value of Dongfulong reached a maximum of 42.7 billion yuan, and is still 26 billion yuan.
Counting from 2019, Dongfulong's high performance growth time has been close to three years, can this high growth trend continue?
Historically, Dongfulong is a listed company with typical cyclicality, and high performance growth is often difficult to sustain.
Starting in 2010, benefiting from the new GMP certification, downstream pharmaceutical companies to increase investment in fixed assets, driven by the upstream pharmaceutical equipment industry ushered in the rapid development of the industry growth rate of more than 30%. Dongfulong's operating income grew rapidly, from 649 million yuan in 2011 to 1.556 billion yuan in 2015, and net profit also grew from 217 million yuan to 387 million yuan.
After that, with the new version of GMP certification driven by the pharmaceutical enterprises fixed asset investment is close to the end of the 2016 Dongfulong negative growth in revenue, the profit side of the rapid decline, profitability continued to decline, in 2018, the revenue of 1.917 billion yuan, net profit of only 70.46 million yuan.
Into 2019, the entire pharmaceutical equipment industry sales bottomed out and rebounded, Dongfulong performance ushered in a reversal, in 2020 to achieve revenue of 2.708 billion yuan, net profit of 463 million yuan; 2021 the first three quarters to achieve revenue of 2.882 billion yuan, net profit of 558 million yuan.
This round of pharmaceutical equipment industry bottomed out and rebounded mainly driven by two factors, namely, biological drug outbreak and new crown epidemic catalyst.
Over the past few years, domestic biopharmaceuticals ushered in a golden period of development, the number of biopharmaceutical companies increased rapidly, biopharmaceuticals continue to accelerate the listing of a large number of innovative pharmaceutical enterprises such as Xinda Biological, Junshi Biological have landed in the capital market. Compared to traditional chemical drugs, the production of biopharmaceuticals is relatively difficult, and biopharmaceutical companies generally prefer to build their own production capacity, with a large investment in fixed assets, which leads to the development of the pharmaceutical equipment industry.
However, since the second half of 2021, the golden period of development of biopharmaceuticals began to terminate and quickly enter the industry winter.
From the policy point of view, on July 2, 2021, the Center for Drug Evaluation (CDE) of the State Drug Administration issued the "Clinical Value-oriented Clinical Research and Development Guidelines for Anti-tumor Drugs" for consultation, which requires that when a drug is subjected to a controlled clinical trial, it should try to provide subjects with the best treatments/drugs in clinical practice. Opinion draft directly poking the pain of the industry's low level, repeated research and development, directly to a number of drugs in the research rejected, a large number of pseudo-innovative biopharmaceutical companies face a major reshuffle.
From the perspective of the capital market, innovative drug companies have now become pariahs, and listed companies whose stock prices have been decimated abound. For example, since 2021, the share price of Hengrui Pharmaceuticals, the largest domestic Hengrui Pharmaceuticals, has fallen from 97 yuan to 36 yuan, Cinda Biologicals has fallen from about 107 Hong Kong dollars to only 27 Hong Kong dollars, and Beida Pharmaceuticals has fallen from 143 yuan to about 50 yuan.
At present, the domestic innovative drugs in the policy and the capital market under the double attack has entered the history of the darkest moment. After the stock price plummeted, innovative drug companies have basically lost the function of financing, a large number of unprofitable drug companies may thus completely closed down and quit. The huge pressure faced by innovative drugs will naturally be transmitted to the upstream pharmaceutical equipment, Dongfulong fear that it will be difficult to survive.
The new crown epidemic catalyst is another factor in this round of pharmaceutical equipment industry bottoming out.
In the past, pharmaceutical equipment orders for vaccine products have been monopolized by foreign companies. Epidemic, foreign manufacturers capacity blocked, and the need to prioritize to meet the needs of their own countries, resulting in a shortage of domestic supply of pharmaceutical machines, domestic pharmaceutical equipment vaccine production orders increased significantly.
Southwest Securities research report, said the new crown epidemic, assuming that the annual capacity of each production line in 50 million doses, taking into account part of the old capacity will be used, it is expected that the new crown vaccine production line will reach 150 new, a production line corresponding to the value of the equipment in the 80 million yuan - 100 million yuan, it is expected that the incremental market of pharmaceutical equipment will reach 12 billion -15 billion yuan. During the epidemic, Dongfulong provided a large number of bioreactors, filtration and separation equipment, syringes canning and pre-filled filling for vaccine production.
The new crown vaccine production capacity situation shows that the annual production capacity of Sinopharm China Biologicals has reached 3 billion doses, and Beijing Kexing Zhongwei disclosed that the annual production capacity of the new crown vaccine is more than 2 billion doses, and the total production capacity of China's new crown vaccine in 2021 is more than 7 billion doses, which is already basically able to meet the needs of the epidemic. This also means that the new crown epidemic catalyzed by the pharmaceutical equipment market will face the end.
Comprehensively, the main factors that drive the pharmaceutical equipment industry bottoming out have undergone major adverse changes, and Dongfulong high growth will be difficult to continue.
From the industry pattern point of view, at present China's pharmaceutical special equipment manufacturing industry competition pattern is relatively decentralized. Brokerage statistics for 2019 show that the market share of Dongfulong is 13.7%, followed by Chutian Technology 10.2%, Xinhua Medical 5.4%, Canaan Technology 5%, and the remaining market share is occupied by the rest of the enterprises.
However, in 2020, Dongfulong's leading position for many years was overtaken by Chutian Technology, reduced to the industry's second. The financial report shows that in 2020, Chutian technology operating income of 3.576 billion yuan, while the East Dragon only 2.708 billion yuan.
In terms of R&D investment, Dongfulong and Chutian Technology 2020 were 156 million yuan, 288 million yuan. Dongfulong R & D investment is significantly less than the latter, the competitive advantage may continue to be Chutian Technology weakened.
"Securities Market Weekly" reporter sent an interview letter to the East Dragon Securities Department, as of press time did not receive a reply from the listed company.