The application fields of digital X-ray detectors are mainly medical, industrial and security, of which medical treatment is currently the main application field. According to statistics, the global digital X-ray detector market size in 2018 is about 1.73 billion US dollars, of which the market share of medical products is about 74%, and industrial and security products contribute to the remaining market. It is estimated that by 2024, the global market size of digital X-ray detectors will reach 2.45 billion US dollars. Large-scale medical imaging equipment can also be divided into four categories: X-ray imaging, computed tomography (CT), magnetic resonance imaging (MRI) and nuclear medicine. Among them, the main ones involved in X-ray detectors are X-ray imaging and CT.
Figure: The main classification of large-scale medical imaging equipment
Source: Guoyuan Securities
The principle of X-ray imaging is that there are differences in the penetration of X-rays to tissues of different densities. It is based on the different degrees of absorption of X-rays by different tissues of the human body, the image intuitively shows the morphology of human organs and bones, and the image space resolution is high, and it is mainly used for the preliminary diagnosis of orthopedics, respiratory, gastroenterology and other diseases.
When X-rays irradiate low-density tissues, the amount of X-rays absorbed is small, the penetrating X-rays are more, showing dark shadows, and the screen produces more fluorescence, and the screen is bright; when irradiating high-density tissues, it is the opposite, showing a light color shadow, the screen produces less fluorescence, and the screen is darker.
X-ray imaging equipment can also be subdivided into: computer X-ray photography (CR), digital X-imaging (DR), digital mammography, C-arm X-ray machine. Among them: the early X-ray imaging is mainly CR, and the imaging plate of CR is the core imaging device. The core imaging device of DR is a digital flat panel detector.
The difference between the two is that the digital detector used by DR can directly convert X-rays into electrical signals, reduce the conversion loss of intermediate links, and the imaging efficiency is higher (DR interval is five seconds, direct film output; CR interval is 1 minute, imaging is 3 minutes). At present, DR has basically replaced CR.
Figure: Differences in principle between CR and DR
Source: Diagnostic Imaging, Guoyuan Securities
Figure: CR/DR comparison
Focusing on DR, it consists of three important parts, namely: X-ray tube, high-voltage generator, and flat panel detector.
The technical barriers of X-ray ball tubes and flat panel detectors are high, which is a pain point for localization, and only Wandong Medical has the production capacity of all core components.
Among them, the performance of the flat panel detector is the key factor in the quality of DR imaging, which largely determines the level of DR. According to the classification of detector materials, it is divided into:
1) Indirect digitization (CCD+CMOS);
2) Direct digitization (amorphous silicon + scintillation coating, amorphous selenium);
Moreover, the mainstream of detector materials is amorphous silicon (mature technology, strong stability, good imaging quality).
According to the Debon Securities report, the structure of the amorphous silicon flat panel detector contains: one layer is a scintillator, the second layer is a TFT sensor, and the third layer is an integrated circuit board composed of a motherboard, a readout chip, a control chip, etc. The scintillator converts invisible light into visible light, the control chip controls the opening and closing of the TFT switch in each pixel unit through a transverse circuit, and reads out the chip accepts the electrical signal transmitted by the TFT sensor through the longitudinal data transmission circuit and converts it into a digital signal.
Figure: Flat panel detector structure diagram
Source: Debon Securities
In addition, according to the different working modes (static detection or dynamic detection), different detector material application scenarios are different.
For example, amorphous silicon is mainly used for static, such as medical DR; while IGZO and CMOS are mainly used for dynamics, such as digital subtraction angiography system (DSA), C-arm X-ray machine, dental CBCT (generally use COMS, but IGZO is higher, the process difficulty is lower, and it is used as an alternative) and so on. According to the French market research company Yole report, amorphous silicon is still the mainstream in the next five years, and IGZO (CAGR: 13%) and CMOS (CAGR: 64%) will develop rapidly.
It is also worth noting that CT imaging equipment has higher requirements for detector materials, mostly using rare earth ceramic crystal materials, and basically relies on outsourcing in China. International companies, such as GE, use Hilight and Gemstone two kinds of rare earth ceramic detectors, Siemens has GOS high-speed rare earth ceramic detectors and so on.
Figure: Comparison of four X-ray detector sensor technologies
Source: Haitong Securities
02
After a general understanding of the X-ray detector situation, let's look at the revenue structure of the representative company:
Yirui Technology
Revenue includes medical (91.88%) and industrial detectors (8.11%). Overseas accounted for 40.58%, and domestic accounted for 53.78%. Medical detectors are mainly general products, and universal wireless accounts for 52.91%.
Pupu wireless series products are mainly used for conventional CR upgrade systems and mobile DR systems; Pupu wired series X-ray detectors are its basic products, and the products are mainly used for fixed DR systems for conventional pupu inspection (including U-arm DR, sickle arm DR, column DR, suspension DR, etc.).
In 2020, the overall revenue of medical digital X-ray detector products will be the mainstay, accounting for more than 90%.
Chart: Revenue structure (unit: 100 million yuan)
Source: Tajian Research
Kangzhong Medical
Before 2020, revenue was mainly based on the general products (62.13%), followed by the industrial/security series (27.5%). The universal amplifier series includes wired series and wireless series, which are mainly used in the digital X-ray imaging system of the universal amplifier, and can also be used to digitally upgrade the traditional X-ray imaging equipment such as film machines and CR equipment. In addition, its overseas income accounted for 42.68%, and domestic income accounted for 53.31%.
From the perspective of revenue scale, Yirui Technology (784 million yuan) > Kangzhong Medical (339 million yuan). Moreover, Yirui Technology is more focused on X-ray detectors in the medical field, and Kangzhong Medical also has more parts of the industrial/security inspection field.
03
Next, nearly a few quarters of revenue and profit growth together to perceive the growth trend:
Revenue growth
From the perspective of income growth, both companies have large fluctuations.
Among them: Yirui Technology - 2020Q2 growth rate is higher because of the impact of health events, the market purchases a large number of mobile DR equipment for health incident prevention and emergency reserves, and the downstream mobile DR machine customers' demand for its products surges. Follow-up needs to pay attention to whether the growth rate will decline as health incidents are gradually resolved.
Kangzhong Medical - The extremely high growth rate of 2021Q1 is due to the impact of health events in the same period last year, the base is low; the lower growth rate of 2021Q3 is due to the surge in product demand due to the prevention and treatment of health events and emergency reserves in the same period last year; and this year's domestic stabilization, foreign markets have no first-mover advantage, resulting in slow overseas expansion, customers will not directly purchase in large quantities.
Attributable net profit growth rate
Chart: Growth rate of net profit attributable to the mother (unit: %)
From the perspective of net profit attributable to the mother, the overall trend is consistent with the trend of revenue growth. The negative growth rate of Kangzhong Medical's net profit attributable to the mother in 2019Q4 is due to the increase in management expenses and research and development expenses, the expansion of its business scale, the introduction of talents and the increase in research and development projects.
04
After perceiving the growth trend, we then take a closer look at each company's revenue and profit:
In the third quarter of 2021, the revenue was 824 million yuan, an increase of 48.62% year-on-year; the net profit attributable to the mother was 326 million yuan, an increase of 109.23% year-on-year. In addition, the 2021 performance forecast, revenue in 1.1 billion yuan to 1.2 billion yuan, an increase of 40.29% to 53.05% year-on-year; net profit attributable to the mother of 450 million yuan to 500 million yuan, an increase of 102.48% to 124.97%.
1) Single-quarter growth analysis: 2021Q3, revenue was 268 million yuan, +58.4% year-on-year, -19.32% q-o-q; net profit attributable to the mother was 116 million yuan, +151.27% year-on-year, -14.17% q-o-q. Revenue maintained a relatively high growth, mainly due to the beginning of the new layout of dental products began to increase, while overseas health events have not yet stabilized, overseas demand is still high; while the higher net profit attributable to the mother is due to other income (government subsidies), net income from investment (trading financial assets, long-term equity investment).
Chart: Revenue and profit growth in recent quarters
Chart: Revenue & Attributable Net Profit (Unit: 100 million yuan)
2) Retrospective of growth in previous quarters: The low attributable net profit in 2019Q3 is the impact of credit impairment losses (mainly bad debt losses in receivables).
In the third quarter of 2021, the third quarter reported revenue of 251 million yuan, an increase of 9.6% year-on-year, and the net profit attributable to the mother was 0.64 billion yuan, an increase of 38.5% year-on-year.
1) Single-quarter growth analysis: 2021Q3 revenue was 0.74 billion yuan, -30.55% year-on-year, -16.78% q-o-q; net profit attributable to the mother was 0.17 billion yuan, -34.55% year-on-year, -28.8% q-o-q. Revenue increased negative year-on-year, mainly due to the impact of health events in the same period last year, the demand and sales of the universal series of products increased significantly; and this year's domestic health events stabilized, and it failed to achieve a significant first-mover advantage compared with international giants and domestic counterparts overseas, and downstream customers usually do not directly purchase in bulk, so their overseas expansion is weak, and the overall sales volume declines. The negative growth in attributable net profit was mainly due to fluctuations in revenue.
2) Trace the growth of the previous quarters: the low net profit attributable to the mother in 2020Q1 is due to the impact of health events, the business has been hindered to a certain extent, the revenue is low, and the cost is higher. (Ng) Let's take a look at the changes in the profitability of the two companies:
Gross margin
Chart: Gross margin (in %)
In terms of gross profit margin, Yirui Technology > Kangzhong Medical.
The gross profit margin of Kangzhong Medical is lower than that of Yirui Technology because the import purchase price of core raw materials such as TFT/PD is higher, resulting in lower unit costs and lower gross profit margins. Due to the advantages of procurement scale and the localization of supply chain, Yirui Technology has a low purchase price of raw materials and low product costs.
Cost structure
From the perspective of cost structure, the X-ray flat panel detector industry is mainly based on direct materials, accounting for more than 70%, followed by manufacturing costs. Among them, the commissioned processing cost of Kangzhong Medical is mainly due to the outsourcing processing method for the production links such as integrated circuit surface mounting and power box assembly. Referring to the cost breakdown structure of Yirui Technology in 2019, 46% of its direct materials are TFT modules, followed by structural parts and scintillators.
Figure: 2019 Yirui cost structure Source: Debon Securities
Net interest rate
Figure: Net Interest Rate (Unit: %)
Overall, the net profit margin of both companies is on the rise.
Among them: The decline in the net profit margin of Kangzhong Medical in 2020Q1 is mainly due to the impact of health events, low business income and higher costs. The overall net profit margin of Yirui Technology is due to its procurement scale and supply chain advantages, and its costs and expenses are properly controlled.
Expense rate
Overall, there is little difference in the costs of the two. (The financial expense ratio is very low and negligible)
Return on equity
Figure: DuPont analysis and dismantling
From the perspective of return, the ROE of Yirui Technology is relatively high, mainly due to the high turnover rate of total assets and equity multipliers. Among them, the low total asset turnover rate of Yirui Technology in 2020 is mainly due to the low inventory turnover rate, mainly due to the increase in sales scale and the increase in material procurement.