First coverage
Investment highlight
For the first time to cover Peijia Medical-B (09996) to outperform the industry rating, with a target price of HK $11.50. The reasons are as follows:
The company spans two high-growth tracks of heart valve and nerve intervention, and is the first echelon of domestic TAVR (transcatheter aortic valve replacement). 2021 is the first year of commercialization of the company's TAVR products, and the first and second generation products are respectively approved to be put on the market, which is expected to be put on the market quickly. Jiaqi Biological, a subsidiary, entered the neural intervention market in 2005 and is a domestic leader in hemorrhagic nerve intervention. We expect the company's revenue to be 1.24 billion yuan in 2025 and 74% CAGR in 2021-2025.
In the first year of commercialization of TAVR, a number of blockbuster products started clinical practice. Despite the pessimistic market sentiment, we are still optimistic about the heart valve track, and it is expected that the surgical permeability will enter a volume inflection point after 5-6 years of market cultivation. The company's first / second generation TAVR product TaurusOne/Elite was approved in June 2021, and the second generation is the focus of promotion. Comprehensive coverage of the company's valvular pipeline: third-generation TAVR TaurusNXT (expected to complete confirmatory clinical enrollment in early 2023); Wave shock wave balloon (FIM); introduction of transstrand TAVR Trilogy for aortic regurgitation since JenaValve (expected to enter clinical in 2023 and approved in 2025) Comprehensive layout of bicuspid and tricuspid valve intervention, self-study edge-to-edge repair is expected to enter the clinical 2H22, the introduction projects include HighLife (TSMVR, expected to enter the confirmatory clinic within this year), Sutra (involution enhancement, animal trials), MonarQ (TTVR, which may be clinically carried out in Europe this year). We estimate that the company's heart valve revenue will be 885 million yuan in 2025, and the market share of TAVR implantation for the treatment of aortic valve stenosis is 18.3%. one
Nerve intervention: comprehensive layout of ischemia, bleeding and pathway products. 1) Hemorrhage: three spring coil products have been approved, accounting for about 3% of the spring coil market in 2021, the second in China, and there is a wide space for import substitution.
The company is developing the third generation hot melt release coils. 2) Ischemia: SacSpeed balloon dilatation catheter was approved by NMPA in August 2020. Syphonet thrombectomy stent, Tethys AS aspiration catheter and Fluxcap balloon catheter were approved on 2-5-6, 2022 respectively. We estimate that the company's income from nerve intervention in 2025 is 357 million yuan.
What is the biggest difference between us and the market? We believe that the long-term demand and competition pattern of TAVR surgery volume are more optimistic than market expectations; the comprehensive layout of tricuspid valve intervention opens more room for growth for the company.
Potential catalysts: admission volume of second-generation TAVR and neurointervention products; early data readout of third-generation TAVR and HighLife, progress of Trilogy registration; license-out of overseas rights of products.
Profit forecast and valuation
We expect the company's 2022-23 revenue to be 322 million pounds, and 2021-23 revenue CAGR to be 97.9%. For the first time, the coverage gives outperformance industry ratings, with a target price of HK $11.50 based on the DCF model (WACC 10.0 per cent, sustainable growth rate of 1.1 per cent), which is 48.2 per cent higher than the current share price.
Risk.
The sales of the products on the market are lower than expected; the progress of research and development is not as expected; the risk of collection and acquisition; the deterioration of the competition pattern.