Key points of investment:
The performance fell short of expectations, and the increase in holdings rating was maintained. The company's revenue for the first three quarters of 2021 was 1,305 million yuan (+17.57%), net profit of 453 million yuan (+6.05%), and net profit of non-return mother was 410 million yuan (+6.22%). Performance fell short of expectations. Considering the impact of the implementation of orthopedic belt procurement results on the company's operations, the 2021-2023 EPS forecast was lowered to 1.57/1.83 yuan/2.23 yuan (originally 1.82/2.29 yuan/2.87 yuan). Considering the decline in the sector's valuation level, the target price was lowered to 65.88 yuan, corresponding to PE 36X in 2022, maintaining the increase in holdings rating.
The purchase of orthopedic belts affected the current revenue growth rate. On a quarterly basis, the year-on-year growth rates of Q1-Q3 revenue in 2021 were 62.84%, 6.57%, and 4.86% respectively. Compared with the compound growth rates of 31.31%, 20.28%, and 18.43% in 2019, respectively, the growth rate has slowed down. It is expected to be related to orthopedic trauma in 12 provinces in July 2021 and poor delivery of goods by dealers after the implementation of national orthopedic joint belt procurement in September.
An increase in the cost rate affects the profit growth rate. Net profit returned to the mother in 2021Q3 fell 16.43% year on year, which was slower than the revenue growth rate. This was mainly due to the increase in the overall expense ratio after the revenue growth rate slowed. The sales expense ratio for the first three quarters was 33.71%, an increase of 1.66 pct over the previous year; the management expense ratio was 4.74%, an increase of 0.80 pct over the previous year; the R&D expense ratio was 8.36%, an increase of 0.72 pct over the previous year.
Promote the construction of high-value consumables platform-based companies. The company won bids for all products in 12 provincial trauma and national orthopedic joint volume procurement projects. The promotion of orthopedic consumables collection is conducive to the long-term healthy development of the industry and the standardization and large-scale development of leaders. The company completed the acquisition of 51% of the shares of Beijing Andesipro, an intervertebral foramen equipment and ancillary equipment and consumables company, to expand the orthopedic product line, while expanding the fields of high-value medical consumables such as neurosurgery, minimally invasive surgery, and dentistry, to create a platform-based company in the field of high-value consumables.
Risk warning: There is a repeated risk of the epidemic, and the volume released after purchasing in volume falls short of the expected risk.