Berry Gene (000710) 2018 Annual Report Comments: Income basically meets expectations and continues to be optimistic about NIPT development
Investment Highlights Performance Summary: The company announced its 2018 annual report and achieved annual revenue14.4 ppm, an increase of 22 in ten years.9%, net profit attributable to mother 2.70,000 yuan, an increase of 15 in ten years.2%, net profit after deduction is 2.5 ppm, an increase of 13 in ten years.0%.Operating cash flow70,000 yuan, an increase of 122 in ten years.4%.  The forecast of performance growth speeds up the clinical progress of blockbuster varieties.The company’s 2018 revenue was basically in line with expectations, and its performance was slightly higher than expected.From a single quarter: 2018Q4 company operating income4.1 ‰, an increase of 15% in ten years, net profit attributable to the mother was 2910.60,000 yuan, 60 years ago.1%, net profit after deduction is 2450.20,000 yuan, 69 years ago.1%.Fourth-quarter profit margins have fallen. Major companies are investing heavily in Heraeus’s research in liver cancer diagnosis.In terms of product lines: 1) Basic scientific research services: revenue share 9.1%, with a growth rate of 152.4%, gross margin increased by 9 in the short term.6%, showing great beauty; 2) Medical testing services: Revenue accounted for 55.2%, the growth rate is 18.8%, mainly benefiting from the further increase in the NIPT market penetration rate and the company’s product upgrades; 3) Reagent sales: Revenue accounted for 27%.9%, an annual increase of 5.2%, due to the decline in product terminal prices, leading to a decline in gross profit margin of the sector by 8%.7pp.From the perspective of profitability: management expenses and R & D investment increased by 22 respectively.9%, 131.9%, of which R & D expenditure accounted for 6% of revenue, and further growth was mainly due to the relatively large proportion of clinical trial projects in the current year, reagent consumables and labor expenses; sales expenses incurred (-10.8%) and financial expenses (-317.2%) has been decreasing, and the decrease in financial expenses is mainly due to the increase in exchange losses and profits arising from the procurement of raw materials.We expect that with the continued advancement of key clinical projects such as early diagnosis of liver cancer, the company’s R & D expense rate will show steady and rising trends.  With increased penetration and product upgrades and price increases, there is still room for NIPT.Growth health screening is the company’s main source of income and profit. We believe that it still has room for growth, and thus includes: 1) Increased penetration rate: Assuming that the population growth rate is maintained at 15 million each year, and the return on childbirth in that year reaches 70%, of which 30%For elderly women, all need to do NIPT, and the remaining non-aged women have a demand of more than 8.5 million people based on the penetration rate of 20%. A conservative estimate is that according to 1,000 yuan per person, the market size is about 8.5 billion. Market spaceStill vast.2) Product upgrade: Upgrade from Bebian to Bebian Plus, the detection level is increased from chromosome aneuploidy to chromosome microdeletion and microduplication, more gene loci are detected, and the price is increased by more than 20%.With the other assumptions unchanged, calculated at 1,200 yuan / person, it corresponds to a market size of 10.2 billion and still doubles the space.Berry Gene is an industry leader in the national NIPT testing business. It has deep technology deposits. It is expected that its revenue will exceed 3 billion to 4 billion U.S. dollars, and the current scale is less than 1 billion, with huge room for growth.  The pilot test of early diagnosis of tumors has verified the reliability of the technology and is in a leading position in the country.At the report level, the company strengthened capital operations and actively deployed early diagnosis services including liver cancer, gynecological tumors and lung cancer.The company’s ongoing research on tumor liquid biopsy is based on cSMART patented technology, which has a detection rate of up to 0.03%, leading the industry.At present, there are nearly 10 million patients with liver cirrhosis, who are at high risk of liver cancer. Each person is tested once a quarter, and the cost of each test is estimated to be 5,000 yuan. The market space for early diagnosis of liver cancer is as high as 200 billion.  Profit forecast and rating.We expect the company’s revenue to grow at a compounded rate of approximately 21 in 2019-2021.8%, the compound growth rate of net profit attributable 天津夜网 to mothers is 23.4%, three-year earnings per share were 1.14 yuan, 1.19 yuan, 1.42 yuan, corresponding to PE is 34 times, 33 times, 28 times, maintaining the “buy” level.  Risk Warning: The risk of clinical progress of tumor species is not up to expectations.