TAVR restoration is underway, entering the fast track of international development; maintaining “buying”

Qiming Medical announced that it achieved revenue of 406 million yuan (-2.3% yoy) in '22 and a net profit loss of 1.06 billion yuan. There was a slight decline on the company's revenue side mainly due to the external environment affecting TAVR's revenue growth in '22 (-12% yoy); however, along with the listing of the company's TPVR at home and abroad, the company's overseas revenue climbed significantly (overseas revenue +393.5% yoy, accounting for 12.8% of revenue). The company's net profit loss increased in '22 (compared to a loss of 3.7 billion yuan in 2021), mainly because the company completed the Cardiovalve acquisition and increased corresponding R&D expenses, and confirmed Keystone's goodwill impairment of about 416 million yuan. Looking ahead to 2023, we are optimistic that the company will benefit from elective surgery volume repair and maintain leading market share. Combined with TPVR products, we forecast the company's revenue of 638/974/1,575 billion yuan in 2023-2025, and that its net profit will be corrected in 2024. Using the DCF valuation method (assuming WACC 10.6%, with a sustainable growth rate of 1.5%), we gave Qiming a target price of HK$20.87 and a “buy” rating.

TAVR: Implant restoration is underway, and I'm optimistic that Venus Plus and Venus Pro will lead the growth company's TAVR products to achieve revenue of 358 million yuan (-12% yoy) in 2022. Looking ahead to 2023, we are optimistic that TAVR product revenue will reach 50%. Consider: 1) In the context of elective surgical repair, the company's implant volume was clearly restored in 2/3 of this year (YOY +55% in a single month), and we are optimistic that Venus A-Valve and Venusa-Plus will steadily rise; 2) Venusa-PRO, an upgraded product launched within 22 years, may be officially launched this year. Looking ahead to the long term, the company's self-developed third-generation products, PowerX and Venus Vitae (both in early feasibility studies), may inject great impetus into the company's TAVR pipeline development with their revolutionary dry valve design.

TPVR: Targeting niche markets, leading the internationalization process. In 2022, the company's TPVR product achieved revenue of 40.87 million yuan in the first year of listing. We are optimistic that the product's revenue will double in 2023. The main reasons are: 1) European market revenue climbs or benefits from overseas demand for revolutionary products (Venus P-Valve has advantages such as a wider range of valve sizes); 2) The company may enjoy a first-mover advantage as the first TPVR product to be listed in China. Furthermore, the company is still working to develop other overseas markets (confirming clinical studies in the US and Japan will soon be launched), thereby helping the company continue to advance its internationalization strategy.

Second- and tricuspid valve: DragonFly is leading the development progress. As the overall research pipeline progresses in an orderly manner, we are optimistic that the company's two/tricuspid valve product portfolio will hit 1.8 billion yuan in revenue by 2030. Consider: 1) Heavy Dragonfly cooperates with Dejin Medical, and the company guides that it may be approved for listing in 2024. We are optimistic that it will achieve revenue of about 1 billion yuan by 2030; 2) Heavy product Cardiovalve (tricuspid reflux indications are in international multi-center confirmatory clinical trials, mitral reflux is in early feasibility studies). It will be listed one after another in 2026. Furthermore, Liwen RF, the hypertrophic cardiomyopathy product planned by the company, completed confirmation clinical trial enrollment in March 2023. We are optimistic that it will open up broad market space for the company as a “new global” product.

Risk warning: Hospital-side diagnosis volume risk, pricing risk, R&D risk, slow increase in surgical penetration rate.