INTCO MEDICAL(SZ:300677) SINOLINK SECURITIES·2024-07-15 00:45Investment Rating - The report gives a "Buy" rating for the company, with a target price of 34.73 CNY per share, based on a 22x PE valuation for 2024 [110]. Core Insights - The company, YK Medical, is a leading player in the disposable glove industry, focusing on medical consumables and rehabilitation care products, with a significant emphasis on nitrile gloves. The company has shown substantial revenue growth and market share expansion, particularly during the global health crisis from 2020 to 2021, and is expected to continue benefiting from the recovery in global glove demand [27][41]. - In 2023, the company achieved total revenue of 6.919 billion CNY, with medical protective products accounting for 89.3% of sales. The overseas business represented 86.7% of total revenue, indicating a strong international presence [29][30]. - The report highlights the performance advantages of nitrile gloves over PVC gloves, including better chemical resistance, comfort, and lower allergy risk, which positions nitrile gloves as a key growth product in the disposable glove market [33][39]. Summary by Sections Company Overview - YK Medical has a total production capacity of 79 billion gloves, with 48 billion nitrile gloves and 31 billion PVC gloves, ranking first among domestic manufacturers and second globally [62][88]. - The company has invested in advanced automated production lines, significantly reducing labor and energy consumption while maintaining high product quality [88]. Market Dynamics - The global demand for disposable gloves is expected to stabilize and grow, driven by increased health awareness and regulatory standards in various industries [41][82]. - The market share of nitrile gloves has increased from 31.6% in 2017 to 35.6% in 2022, with projections to reach 37.1% by 2025, indicating strong growth potential for this product category [39][41]. Financial Performance - The company reported a compound annual growth rate (CAGR) of 34.8% in revenue from Q1 2019 to Q1 2024, reflecting robust growth despite a decline in glove prices post-2021 [27][29]. - The gross margin for Q1 2024 was 20.65%, higher than competitors, indicating effective cost management and production efficiency [68]. Production and Cost Structure - The company has strategically positioned itself in the upstream supply chain by investing in nitrile latex production, which helps mitigate raw material price volatility [70][92]. - The use of clean coal as the primary energy source provides a cost advantage over competitors relying on natural gas, with coal prices being significantly lower [96]. Future Outlook - Revenue projections for 2024 to 2026 are 9.295 billion CNY, 10.801 billion CNY, and 11.970 billion CNY, respectively, with growth driven primarily by nitrile glove sales [103]. - The company plans to expand its overseas production capacity to mitigate tariff impacts and leverage lower labor costs in Southeast Asia [79][100].