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Winner Medical Group- on the top of Chinese Medical Textile Market

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Winner Medical Group Inc (NASDAQ: WWIN) has had some milestone news of late and has, among other things, battled with some true shareholder ferocity to form resistance levels as the broader markets continued their August “de-valuation” of companies from China and those in the medical supply industry. On a good note, valuations are slowly, but steadily beginning to turnaround…

For Winner Medical Group Inc (NASDAQ: WWIN) the milestone news runs along the lines of: a very solid recent quarter; taking up guidance; being ranked as the undisputed number one exporter from mainland China of surgical dressings and medical disposables; and its “PurCotton” products, which sometimes use and contain 100% U.S.-grown cotton, being granted the COTTON USA branding mark license authorized by the Cotton Council International.

That’s a lot of good news in the midst of such a tumultuous summer.

In business for twenty years, the Company has fourteen wholly-owned operating subsidiaries and three joint ventures, which manufacture tailored medical disposables and dressings, as well as non-woven fabric made from 100% natural cotton. With a vertically integrated supply chain ranging from spinning fabric to finished goods, Winner Medical Group Inc (NASDAQ: WWIN) provides its products to China, the United States, South America, Europe, and Japan.

Let’s look at some of its recent Q3 ’11 numbers posted August 8…

The Company revenue increased by 34% over Q3 ‘10 to $41.5 million. Sales to Brazil increased 268% YOY to $3.0 million. Domestic China sales increased 52% YOY to $9.0 million and sales to the Japanese and European markets increased 47% and 30%YOY to $6.2million and $16.1million, respectively. Very healthy. And management at Winner Medical Group Inc (NASDAQ: WWIN) for FY 2011 revenue increased guidance to $144-$152 million, representing 25%-32% YOY growth. Very healthy indeed. Net income for Q3 ’11 increased by 2% to $3.4 million, or $0.14 per basic share.

Looking over ones shoulder, the Company had Trailing Twelve Month (TTM) revenue as of 03/31/11 of $126.1 million, EPS (TTM as of 03/31/11) of +$0.50 and achieved over 20% net sales CAGR over the last six years (2004-2010). Impressive. One other note which I think is key to a healthy bottom line is that the Company’s “Accounts Receivables” as a general rule never top out over 50 days. Good cash flow.

Analysts looking at the Q3 ’11 quarter were pleasantly surprised by management in regards to the ‘jumpy’ cost of cotton last year. Winner Medical Group Inc (NASDAQ: WWIN) said it had established more stringent futures trading procedures and policies, risk-reducing strategies and on-going assessment of trading performance to hedge against cotton price fluctuation. Smart.

While cotton itself has fallen in price in 2011 and has leveled out to what most would call ‘stable prices’ it will be a while before a “Norm” is completely established and the Company’s recent Q3 reflects gross margins fell due to higher costs. But the Chinese government announced earlier this year that it was establishing a cotton reserve system and would pay farmers a premium to grow the crop. China's cotton acreage is estimated to grow at just 5% this year, half the rate the government had predicted. The subsidies will provide wholesale price stability.

Management at Winner Medical Group Inc (NASDAQ: WWIN) also made a very key decision very clear to analysts about Q3… when asked if the Company would add to its 40 retail stores in the near future; the answer was remarkably honest, and savvy: “… until the current 40 stores individually break even or show a profit, then new stores will have to wait…” How refreshing to hear such common sense. The Company, in addition to its wholesale supply chain and its brick and mortar retail business, has a growing e-commerce business making its products accessible where it doesn’t have a physical presence.


Winner Medical Group Inc (NASDAQ: WWIN) makes and sells multiple applications for the Home Care, Personal Hygiene, Medical, Laboratory, and Industrial markets.

For example, its Medical Care Products include: Operating Room Dressings, Procedural Packs, and Protective Products and Gauzes and its Wound Care Products include: Dressing Pads and Dental Products.

The Company’s signature base material is “PurCotton” which is a 100% cotton spunlace nonwoven material and its manufacturing process is patented in more than 50 countries and regions.

The Company’s 4,500 employees are diversely spread out…


The Winner Medical Group Inc (NASDAQ: WWIN) has 8 wholly owned subsidiaries and 4 joint venture companies: Winner Industries (Shenzhen) Co., Ltd, Winner Medical & Textile Ltd. Zhuhai, Hubei Winner Textile Co., Ltd, Winner Medical & Texitile Ltd. Jiayu, Winner Medical & Textile Ltd. Jingmen, Winner Textile Weaving Co., Ltd. Yichang, Winner Medical & Textile Ltd. Chongyang, Winner Medical & Textile Ltd. Winner Medical (Huanggang) Co., Ltd, Shanghai Winner Medical Apparatus Co., Ltd. (60% ownership), Winner Medical (Hong Kong) Limited (60% ownership), Winner Medical &Textile Ltd Xishui (40% ownership), and Winner Medical Jordan Ltd. (35% ownership).

And here is a more detailed list of what they make and where…

* Hubei Winner mainly produces cotton yarns, dental sponges and gauze cuttings.

* Jiayu Winner mainly produces spunlace cotton and absorbent cotton products.

* Jingmen Winner mainly produces lap sponges, fluffy bandages, and towels.

* Yichang Winner mainly produces grey gauze and fabrics.

* Chongyang Winner mainly produces gauze rolls & sponges.

* Huanggang Winner mainly produces PurCotton products

* Xishui Winner mainly produces gowns, drapes and masks.

* Shanghai Winner mainly produces co-adhesive elastic bandages and all kinds of plaster.


China’s medical dressing exports were $1.2 billion in 2010, a 19% year over year growth, and by looking at two of the Winner Medical Group Inc (NASDAQ: WWIN) products; diapers and feminine sanity napkins, the China markets will become more self evident.

For example with regard to Feminine products; In 2008, China had a 68% penetration rate domestically for sanitary napkins vs over 90% in developed countries and with respect to baby diapers; in China there are 20 million 0-3 year old infants with less than a 2% penetration rate for baby diapers: There are penetration rates of 44% globally and 96% in North America. That’s a big market for Winner Group at its retail stores, which sell nearly 400 different types of products, and its e-commerce site. Think: Huggies or Pampers.

As an investment proposition, there are virtually no short sellers to apply downward pressure to share valuation, the P/E of 7.5 is very modest, and that global growth into Brazil has really paid off. There’s a very thorough investors room at: http://winnermedical.investorroom.com where you can get a lot more information for free. At its current $3.38 a share, I think the stock is attractively priced for ‘new entry’ buyers.

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