Event: the company released its annual report for 2021, with operating income of 3.097 billion yuan, an increase of 17.07% over the same period last year, and a net profit of 291 million yuan, an increase of 43.71% over the same period last year, deducting 257 million yuan of non-return net profit, an increase of 39.23% over the same period last year. The company released its quarterly report for 2022, with an operating income of 867 million yuan, an increase of 28.81% over the same period last year, a net profit of 71 million yuan, an increase of 55.67%, and a net profit of 62 million yuan, an increase of 39.99% over the same period last year. Performance is in line with market expectations. At the same time, it is proposed to pay out 2 yuan (including tax) for every 10 shares.

Comments: the performance is growing rapidly, and new products are on the market one after another. The company's 2021 net profit increased by 43.71% compared with the same period last year. In the first quarter of 2022, the net profit increased by 55.67%, achieving rapid development. Affected by the global demand for vaccination, the company's revenue from syringe products increased by 49.93% in 2021, while revenue from intervention products grew by 51.4%, providing an increase for the company's performance. In addition, the company has entered the new product listing cycle. In October 2021, the company became the first enterprise in China to get the registration certificate of beauty needles for three types of medical devices. In addition, the company has accelerated the process of R & D and listing of safety products and consumer products. It is expected that safety insulin needles, safety indwelling needles, water light needles, small microneedles, egg extraction needles, hair needles and other products will be approved one after another in the second half of this year, so as to further improve the company's product matrix and open up new incremental markets.

The sales expense rate continues to improve, and the profitability is gradually enhanced. The company's sales expense rate in 2021 was 10.01%, down 1.47% from the same period in 2020 to 8.97% in the first quarter of 22, and a drop in 2.87pct compared with the same period in 2021. We believe that on the one hand, the collection of retention needles helps the company to open up some blank markets, on the other hand, because of the increase in the share of overseas markets, overseas customers are more sticky, and the rate of sales expenses is usually lower than that of the domestic market. The decrease in the expense rate led to an increase in the net interest rate. The company's net interest rate in 2021 was 13.54%, which was 1.20% higher than that in 2020. The 22-year Q1 net interest rate was 11.94% higher than that of the same period in 2021, and increased by 1.96pct compared to the same period in 2021. With more new products with high gross margin coming on the market this year, the company's profitability will continue to improve.

The impact of the epidemic is limited, to shoulder social responsibilities. With the spread of the epidemic in Shanghai since March, the company, as the leader of the domestic puncture industry, has become a medical material support unit in Shanghai. The company's production and logistics activities in Shanghai are still carried out in an orderly manner with the help of the government. Contribute to the supply of medical materials in Shanghai and shoulder social responsibility. At the same time, the company's factories in Wenzhou, Guangxi and Zhuhai carry the demand for domestic trade business, minimizing the impact of the epidemic on the company, so we think the second quarter can continue the growth trend of the first quarter.

Profit forecast, valuation and rating: the company is the leader of medical puncture infusion devices. Considering the impact of the epidemic on the company, the net profit of 2022 / 2023 is slightly reduced to 391 million yuan (originally 394 million yuan, down 0.77%) / 487 million yuan (original 494 million yuan, down 1.42%). The new 2024 net profit is forecast to be 606 million yuan, and the current price corresponds to the 15-12-10 PE of 2022-24. Maintain a "buy" rating.

Risk tips: delayed production capacity; beauty needle release is not as expected; new products on the market is not as expected; indwelling needle collection is not as expected; the impact of the epidemic.