A few days ago, Gongdong Medical (605369. SH) announced that its holding subsidiary, Zhengzhou Gongdong Medical Device Co., Ltd. (hereinafter referred to as "Zhengzhou Gongdong"), has obtained the "Business License" issued by the Market Supervision and Administration Bureau of Zhengzhou Airport Economic Comprehensive Pilot Zone. The registered capital of Zhengzhou Gongdong is 60 million yuan, Gongdong Medical holds 70% of the shares, and Antu Biotech, an important customer of the company, holds 30% of the shares.
Gongdong Medical said that Zhengzhou Gongdong will focus on the R&D, production and sales of medical polymer consumables and related products and services, which is conducive to extending the company's industrial chain and strengthening the company's market development in the Central Plains with the help of the industry experience and market foundation of the joint venture party and its team, further improving the business layout and enhancing the comprehensive competitiveness.
Lanfu Financial Network noticed that in the third year after the listing of Gongdong Medical, there was a significant decline in operating performance, and the company's profitability continued to decline. In addition, Gongdong Medical continues to expand overseas markets, and although it has achieved initial results, its future development potential remains to be seen.
In the third year after listing, the performance suffered a "Waterloo"
According to public information, Gongdong Medical was established in 1985 and is a high-tech enterprise specializing in the research and development, production and sales of disposable medical consumables.
In 1995, Gongdong Medical went abroad for the first time and cooperated with well-known foreign enterprises. In the following years, the company made steady progress, and many of its products have passed the EU CE certification, and the zero-defect results have passed the on-site review of the US FDA at one time. By 2007, Gongdong Medical became the first manufacturer in the industry with sales of more than 100 million yuan, and the company gradually established a leading position in the domestic and foreign markets.
In 2013, Gongdong Medical added No. 39 factory area and set up a subsidiary, Maide Mold Factory, which further improved its production capacity and industry influence. At the same time, the company has increased its R&D efforts, and in 2016, it entered the IVD customized consumables business, and gradually has the ability to provide customers with systematic product customization services from design to production. In 2018 and 2021, the company successively expanded its pharmaceutical packaging materials business and cell culture business.
In September 2020, Gongdong Medical successfully landed in the capital market. From 2020 to 2022, Gongdong Medical achieved revenue of 830 million yuan, 1.194 billion yuan, and 1.469 billion yuan respectively; The net profit attributable to the parent company was 226 million yuan, 311 million yuan and 326 million yuan respectively. The company's revenue and net profit have maintained year-on-year growth.
However, the good times did not last long, and Gongdong Medical's performance in the third year after listing suffered a "Waterloo". In 2023, Gongdong Medical will achieve revenue of 975 million yuan, a year-on-year decrease of 33.61%; The net profit attributable to the parent company was 109 million yuan, a year-on-year decrease of 66.53%.
In this regard, Gongdong Medical explained that the company's sales orders fell sharply compared with the same period last year due to factors such as the periodic "destocking" of downstream customers and the high base caused by the domestic sales of a large number of epidemic-benefiting products in the same period of 2022.
The IVD business is not developing smoothly, and profitability continues to decline
After more than 30 years of development, Gongdong Medical has continuously expanded the depth and breadth of its product line, and has now developed into a large-scale enterprise with a complete range of products among domestic disposable medical consumables manufacturers. However, the development of Gongdong Medical's IVD customized consumables business has suddenly encountered difficulties, and the company's profitability has continued to decline.
IVD is translated as in vitro diagnostic products, as a branch of medical devices, covering common biochemical, immune, hemagglutination and other testing equipment in hospitals, and plays an important role in disease diagnosis.
In the domestic market, Gongdong Medical focuses on expanding customized products such as IVD supporting business and pharmaceutical company business. During the epidemic, Gongdong Medical's IVD customized consumables business achieved rapid growth.
In the second quarter of 2020, Gongdong Medical launched epidemic prevention and anti-epidemic products such as medical isolation masks in a timely manner, achieving sales revenue of 130 million yuan. In 2021, Gongdong Medical's regular business revenue was 1.083 billion yuan, a year-on-year increase of 57.63%, mainly due to the year-on-year increase of 169.15% in the IVD customized consumables business under the company's domestic direct sales model.
However, with the dissipation of the epidemic, Gongdong Medical's IVD custom consumables business has still been affected, which can be seen from the company's performance decline in 2023. In addition, in the 2023 performance report, Gongdong Medical did not mention "IVD customized consumables", nor did it disclose data such as the revenue performance of the business.
Lanfu Finance Network noted that in 2023, the revenue of Gongdong Medical's medical device business will be about 956 million yuan, a sharp decrease of 34.52% year-on-year. In addition, Gongdong Medical's profitability seems to be declining. From 2021 to 2023, the gross profit margin of Gongdong Medical's medical device business will be 44.4%, 39.39%, and 32.08% respectively.
The expansion of overseas markets has achieved initial results, but the sustainability still needs to be observed
Faced with the dilemma of sudden performance decline and continuous decline in profitability, Gongdong Medical vigorously expanded overseas markets, hoping to further expand the company's industrial layout through a combination of endogenous development and epitaxial mergers and acquisitions.
In January 2023, Gongdong Medical increased its wholly-owned U.S. subsidiary, Gd Medical, with its own funds of US$45 million, and absorbed and merged the original TPI business and assets through business combination. Gongdong Medical said that the company has taken a solid first step in the layout of overseas production capacity, which is conducive to expanding the US market and providing localized services for local customers. At the same time, we will give full play to the respective advantages of Chinese and American business entities, realize complementary resources, continue to acquire new customers, cultivate new markets, and develop new technologies.
Fortunately, Gongdong Medical's overseas layout has achieved certain results. In 2023, the overseas revenue of the company's main business will reach 531 million yuan, a year-on-year increase of 21.56%. According to reports, Gongdong Medical focuses on the customized business of overseas large customers, and strengthens the development of leading customers in the global in vitro diagnostic industry, some of which have made substantial progress.
However, it should be noted that developed countries such as Europe, the United States and Japan are still the main export markets for medical devices in the mainland. Under the influence of factors such as sluggish demand in Europe, the continuous promotion of the "CHINA+" policy in Europe and the United States and the continuous provocation of trade frictions, and the return of demand for epidemic prevention materials, the mainland's export data to developed countries such as Europe, the United States and Japan has declined significantly. The export business of domestic medical device companies may be affected.
Gongdong Medical also pointed out in the 2023 performance report that the exchange rate of RMB against the US dollar has been in a state of continuous fluctuation in recent years, and the fluctuation of the exchange rate will affect the export sales price of the company's products and cause uncertain impact on sales in overseas markets. At the same time, the potential exchange gains and losses will also affect the company's performance.
Therefore, the sustainability of Gongdong Medical's overseas business development remains to be further observed. The company's development goals are very clear, but in the implementation process, it may encounter a lot of resistance, which will test a company's ability to tackle tough problems and continue to expand.