Comments on new shares: Dongfang biology, fighting for eight suits

Dongfang bio, a new stock of science and technology innovation board, is mainly engaged in rapid in vitro diagnostic reagents, and is expected to start subscription on January 16, 2020 The in vitro diagnostic reagent industry has a large space, high profit margin and the possibility of import substitution In the industry, there were two big bull stocks, Wanfu biology and egg biology From the perspective of financial statements, Oriental biology is a steady growth enterprise So, is Oriental biology worth investing in? Let's start with a gossip On October 30, 2017, the court of Anji County, Zhejiang Province ruled a small case in which Hangzhou Butong Professional Clothing Co., Ltd recovered the garment processing funds from Dongfang biology in Anji County From the facts identified by the court in the judgment, we can roughly understand the context of the matter: in 2015, Dongfang biology ordered 50 suits and 16 shirts from Hangzhou Butong as employees' work clothes Each suit includes a suit top, two pairs of trousers or skirts, and four shirts A suit is 1200 yuan and a shirt is 80 yuan At the end of 2015, Hangzhou Butong delivered goods on time At the beginning of 2016, Dongfang biology paid 42 suits, and agreed with Hangzhou Butong After recruiting new employees and distributing the remaining 8 suits, it will pay Hangzhou Butong the balance If the clothes are not distributed, they will be returned to Hangzhou Butong In 2017, Oriental bio didn't pay the balance or return the clothes In August 2017, Hangzhou Butong sued Oriental creatures In October 2017, the court ruled that Dongfang biology should pay 10880 yuan to Hangzhou Butong within 10 days There's an episode Dongfang biology tried to persuade the judge to return the suit and stop paying the balance according to the previous agreement The court ruled that Dongfang bio would not return the suit for nearly two years, and whether the suit was a customized work suit or a Hangzhou cloth Tong, leaving Dongfang bio to recruit new employees, would not cause waste The case No (2017) zhe 0523 min Chu 5548, the full text of the judgment is disclosed on China judgment document network This suit lawsuit can only be regarded as gossip, and we can't deny Oriental creatures with this vote, although I don't like this kind of behavior Objectively speaking, Dongfang biology abides by the agreement and laws, but tries to maximize its own interests within the scope of the rules, does not consider the interests of suppliers, and does not do things in a proper way In fact, Dongfang bio has a lot of money In terms of financial statements, Dongfang bio is not short of money, with continuous income growth, high profit margin and good cash flow In 2018, the operating revenue and profit of Oriental bio were RMB 286 million and RMB 64 million respectively Over the past few years, the growth rate of income has been more than 20% The profit margin of Oriental biology is also enviable The gross profit margin is maintained at 47-48% all the year round, and the net interest rate is between 15-22% In 2016-2018 and the first three quarters of 2019, Dongfang bio's total net profit was 188 million yuan, and its net operating cash flow was 121 million yuan Cash flow is slightly worse than net profit, but it is still a good level of cash flow Source: announcement of the company (organized by Dao Kechuang) source: announcement of the company (organized by Dao Kechuang) that 98% of the income of Oriental biological products, which are mainly engaged in drugs and infectious disease detection reagents, comes from real-time diagnostic reagents, commonly referred to as POCT in the industry The so-called real-time diagnostic reagent is a diagnostic product that can get the test results quickly without complicated operation in the laboratory Most people have seen pregnancy test stick pregnancy test paper, is a kind of real-time diagnostic reagent Dongfang bio's products can be used to detect drugs, infectious diseases, ovulation, pregnancy, tumors, heart disease and so on Among them, drug testing reagents accounted for about 53% of the revenue in 2018, infectious disease testing reagents accounted for about 27% of the revenue in 2018, and eugenics and eugenics testing reagents accounted for about 15% of the revenue in 2018 The three accounted for more than 95% of the total revenue in 2018 Due to the endless variety of drugs, Oriental biological's drug detection reagents can achieve the joint detection of a variety of traditional drugs and new drugs The related products have passed the professional laboratory evaluation in Australia and Canada, and their performance is in the leading position in the industry Oriental bio's infectious disease detection reagents cover a wide range, can identify AIDS, hepatitis and malaria, up to more than 50 kinds of diseases, and has been certified by the European Union POCT industry space: the POCT industry in which big Oriental biology is located has a large space The global market space in 2016 was about 20.2 billion US dollars, and the growth rate in the past few years was about 6% North America accounts for about 39%, Europe 29%, Asia Pacific 23% and other regions 9% China's POCT market accounts for a very small proportion of the world, and has grown rapidly in recent years In 2013, the market space is about 800 million US dollars, and it is estimated that in 2018, it will be about 2.05 billion US dollars, with an annual growth rate of more than 20% Among them, the global real-time drug detection market was about 620 million US dollars in 2015 and is expected to reach 830 million US dollars in 2018 This is mainly due to the serious global drug abuse problem, with 275 million people taking drugs in 2016 Drug abuse is especially serious in American society According to statistics, one sixth of Americans have drug use experience, and 60% of the world's drugs are sold to the United States In order to deal with the drug threat, governments have taken anti drug measures Drug real-time detection technology can provide a lot of convenience for drug control work The global market for instant detection of infectious diseases was about US $1.5 billion in 2016 In the United States, sexually transmitted diseases such as syphilis, gonorrhea and AIDS have a higher incidence rate The incidence rate of tropical diseases is high in Africa, such as malaria and dengue fever Real time detection products can diagnose patients conveniently and cheaply, facilitate timely treatment and isolation, and reduce the possibility of large-scale spread of the disease in the population The global eugenics instant testing market was about US $1.25 billion in 2016 The eugenics test can help identify pregnancy and ovulation The market is still growing as women increasingly focus on personal privacy and health The industry is dominated by multinational companies, which are part of the in vitro diagnosis industry In 2017, the size of the global in vitro diagnostic market was US $52.6 billion, about 2.5 times that of the POCT market About 56% of the in vitro diagnostic industry is occupied by 5 multinational companies, including Roche, Danaher, Abbott, Siemens and semefei There are many in vitro diagnostic enterprises in China, among which there are many listed companies of Wanfu biology, base egg biology and Mingde biology Compared with transnational companies, they are still small in scale and have large space for import substitution The industry has a high profit margin, the cost of POCT reagent production is not high, the final product unit price is low, and customers are not sensitive to the price POCT reagent production is a bit similar to gold foil, the unit price of raw materials is very high, but the actual amount of each product is not large, only a thin coating on plastic or paper POCT reagent is very cheap, for example, pregnancy test paper is only sold for a few yuan in Jingdong, and the factory price of Oriental biology is only a few cents, so the buyer has no strong desire to reduce the price Therefore, the profit margin of POCT industry is high and many listed companies in the industry are not poor The gross profit margin of Wanfu biology and basic egg biology is around 70% Oriental bio's gross profit margin is slightly lower, which can also be close to 50% It is also a high profit margin in the medical industry Source: company announcement (Daoke Chuang collation) source: company announcement (Daoke Chuang collation) focuses on export, distribution and OEM The gross profit margin of Oriental bio is lower than that of its peers because of different income composition The export income of Oriental biology accounts for about 95%, far higher than that of its peers In the international market, several domestic enterprises mostly adopt OEM and ODM mode and sell through distributors The ODM income of Oriental biology accounts for more than 80% Compared with private brand sales, the gross profit margin of export OEM mode is relatively low Oriental bio's income from the United States accounts for a relatively high proportion, accounting for about 42%, 49% and 53% respectively in 2016-2018 But the risk of trade friction is not high at present Oriental biological products are not within the scope of tariff increase Moreover, China and the United States recently reached the first stage agreement, and trade disputes tend to ease Long term risks need to be observed Source: according to the company's announcement (daokechuang and collation), apart from the close relationship between export revenue and domestic leading Wanfu biology, Dongfang biology has a significant gap with the second largest in China in terms of overall scale, and its revenue and profit are only about 1 / 5 of the domestic leading ones Source: company announcement (sorted out by Dao Kechuang) there are many reasons for the development of Fang's family business lagging behind its peers, and the governance structure may be one of the reasons Dongfang biology is a family business, and its equity and board of directors are controlled by the Fang family A number of venture funds have invested before going public The shareholding ratio of senior executives is very low There are 7 directors and 3 independent directors Among the remaining four non independent directors, Ye Su is the representative of venture capital The other three are Fang Xiaoliang, Fang Jianqiu and Fang Xiaoping Fang Jianqiu is Fang Xiaoliang's son Fang Xiaoping is Fang Xiaoliang's sister The actual controllers of the enterprise are Fang Xiaoliang, Fang Jianqiu and Fang Bingliang Fang Jianqiu is Fang Xiaoliang's son Fang Bingliang is Fang Xiaoliang's younger brother The three together control more than 60% of Dongfang biology Several venture capitalists hold less than 30% of the shares Other senior executives and key technical personnel, the prospectus disclosed a total of 11 people, indirectly holding the equity of Dongfang bio through Anji Yongwei, each holding about 0.1% of the equity of Dongfang bio before listing Considering the dilution of equity, if the market value of the listed company is 2 billion yuan, the market value of each executive's stock is about 1.5 million yuan The boss of Oriental biology is very stingy to the executives with low executive pay, not only the equity is little, but also the salary is not much In addition to Chairman Fang Xiaoliang and boss son Fang Jianqiu, Tan Jinfeng, pangqi, Xu faying and Zhong Chunmei, four deputy general managers, were all paid in the early part of 200000 yuan in 2018, respectively 21.20, 2063, 2001 and 200000 yuan Compared with peers, the annual salary of the deputy general manager of Wanfu biology in 2018 is generally more than 500000 yuan, and that of the deputy general manager of egg biology in 2018 is between 400000-800000 yuan The boss of Dongfang biology is not generous to the R & D personnel due to the low level of R & D investment, and his salary is lower than that of his peers In 2018, the average salary of the R & D personnel of Wanfu biology and egg biology exceeded 150000 yuan, but that of Oriental biology was less than 100000 yuan However, the two main competitors are in big cities, Wanfu biology is in Guangzhou, and basic egg biology is in Nanjing Oriental life in Anji County, 50 kilometers southwest of Hangzhou, Zhejiang Province, has a slightly lower cost of living In 2016-2018, the R & D cost rate of Oriental biology was also significantly lower than that of its peers Only in the first half of 2019, the R & D cost rate had a certain level of anti excess Source: company announcement (Daoke Chuang collation) source: how much the share price of company announcement (Daoke Chuang collation) can reach can only be simulated according to the valuation level of peers The calculation method is very rough, which is not a valuation At present, the pettm of Wanfu organism is about 49, and the base egg organism is about 24 Considering that the growth rate of income and profit of Oriental bio is between Wanfu bio and egg based bio, let's say that the valuation level of Oriental bio is between them The total net profit of Oriental biology in the past four quarters is about 72 million yuan If calculated according to pe24 and 49, the market value is between 1.7 and 3.5 billion yuan After the issuance, the total share capital is 120 million shares, and the corresponding share price is 14-29 yuan / share According to the calculation of 560 million yuan of raised funds, listed companies may expect the valuation to be more than 2.24 billion yuan The inquiry report of Huaxin securities gives a valuation of 2.63 billion yuan Conclusion family business, miserly, OEM, not the industry leader, seems to make people think the company is not attractive However, the family governance structure may play a positive role in the field of technological innovation and creative marketing, when the enterprise scale is small In POCT, a good industry with large space and high profit, Oriental biology has maintained a steady growth in the past few years, and it will go further in the future However, there are uncertainties in the growth process of enterprises, and the valuation of new shares is not entirely determined by fundamentals There are risks in the stock market, so you should be cautious when entering the market This article only represents