标题：Dian DiagnosticsAn ICL leader with a service + product business model
发布日期：2016-03-01 7:09:18
内容： Investment positives China’s ICL market enters rapid growth; leaders to grow stronger. Controlling healthcare cost forces hospitalsto seek revenue from services such as testing, driving rapid growth in the outsourcing market of clinical diagnosticsservices. Tight healthcare cost control in the US over the 1970s and 1980s led to a 30-year market boom. We expectDian Diagnostics’ medical testing services to benefit from rapid growth in the outsourcing of diagnostics services byGrade-II hospitals. As a leading ICL player, we expect the firm to grow stronger thanks to its economies of scale. Competitive advantages in channel; inorganic growth gaining momentum. With services + products businessmodel, the Dian enters hospital channels through product agency services. This business model has been successful ineast China, and the company is duplicating this business model in different regions. The company’s 4+4 inorganicgrowth plan is progressing smoothly. Dian is in 18 provinces, and plans to expand nationwide over the next 2~3 years. Smooth progress of new businesses; synergy with traditional businesses to emerge gradually. Dianacquired Biosan and entered the maternal & child testing and genome sequencing markets. Dian should also benefitfrom development of the noninvasive prenatal testing market. The firm has obtained a license for genome-sequencingtests for cancer. The high-margin personalized physical examination business should improve product mix. Newbusinesses may also generate synergy with traditional businesses to some extent. Financials As Dian will consolidate financial statements of Biosan and Xinjiang Yuanding in 2016, we expect EPS to grow 58%80% and 37% over 2015~17 to Rmb0.65, Rmb1.17 and Rmb1.60, mainly driven by growth of the ICL andmaternal & child testing businesses and consolidation of the above financial statements. Our earnings forecasts do notreflect a possible contribution from the physical examination and genome sequencing businesses. Valuation and recommendation Initiate with BUY. We use an SOTP approach to set our TP at Rmb67 based on 58x 2016e P/E, with a target marketcap of Rmb20.2bn. we expect net profit from the ICL & maternal and child testing businesses at Rmb192mn andRmb65mn in 2016. The listed chain providers of medical services now trade at 60x 2016e P/E. Given the acceleratedprogress of hierarchical diagnosis and treatment and the growth potential of genome sequencing, we set target ourvaluation at 65x P/E for these business, with market caps of Rmb12.5bn and Rmb3.9bny. The IVD agency business hasa net profit of Rmb96mn, and we set our target valuation at 40x, with a market cap of Rmb3.8bn. Risks: Growth in eastChina slower than expected; regulatory policy risk.
发布日期：2016-03-01 7:09:18
内容： Investment positives China’s ICL market enters rapid growth; leaders to grow stronger. Controlling healthcare cost forces hospitalsto seek revenue from services such as testing, driving rapid growth in the outsourcing market of clinical diagnosticsservices. Tight healthcare cost control in the US over the 1970s and 1980s led to a 30-year market boom. We expectDian Diagnostics’ medical testing services to benefit from rapid growth in the outsourcing of diagnostics services byGrade-II hospitals. As a leading ICL player, we expect the firm to grow stronger thanks to its economies of scale. Competitive advantages in channel; inorganic growth gaining momentum. With services + products businessmodel, the Dian enters hospital channels through product agency services. This business model has been successful ineast China, and the company is duplicating this business model in different regions. The company’s 4+4 inorganicgrowth plan is progressing smoothly. Dian is in 18 provinces, and plans to expand nationwide over the next 2~3 years. Smooth progress of new businesses; synergy with traditional businesses to emerge gradually. Dianacquired Biosan and entered the maternal & child testing and genome sequencing markets. Dian should also benefitfrom development of the noninvasive prenatal testing market. The firm has obtained a license for genome-sequencingtests for cancer. The high-margin personalized physical examination business should improve product mix. Newbusinesses may also generate synergy with traditional businesses to some extent. Financials As Dian will consolidate financial statements of Biosan and Xinjiang Yuanding in 2016, we expect EPS to grow 58%80% and 37% over 2015~17 to Rmb0.65, Rmb1.17 and Rmb1.60, mainly driven by growth of the ICL andmaternal & child testing businesses and consolidation of the above financial statements. Our earnings forecasts do notreflect a possible contribution from the physical examination and genome sequencing businesses. Valuation and recommendation Initiate with BUY. We use an SOTP approach to set our TP at Rmb67 based on 58x 2016e P/E, with a target marketcap of Rmb20.2bn. we expect net profit from the ICL & maternal and child testing businesses at Rmb192mn andRmb65mn in 2016. The listed chain providers of medical services now trade at 60x 2016e P/E. Given the acceleratedprogress of hierarchical diagnosis and treatment and the growth potential of genome sequencing, we set target ourvaluation at 65x P/E for these business, with market caps of Rmb12.5bn and Rmb3.9bny. The IVD agency business hasa net profit of Rmb96mn, and we set our target valuation at 40x, with a market cap of Rmb3.8bn. Risks: Growth in eastChina slower than expected; regulatory policy risk.
