Incident 1: The company released its 2022 annual report: in 2022, the company achieved revenue of 1,184 million yuan (+8.49% YOY), net profit of 22 million yuan (-65.52% YOY), net profit of -6.66 million yuan (-115.04% YOY), net profit of -6.66 million yuan (-115.04% YOY), and EPS of 0.13 yuan.
Incident 2: The company released its report for the first quarter of 2023:23Q1, the company achieved revenue of 345 million yuan (+18.09% YOY), net profit of 27.16 million yuan (+94.75% YOY), and net profit of 2.38 million yuan (+80.71% YOY) after deducting non-return to the mother.
Comment:
Revenue from the hemodialysis business grew steadily, profits were under pressure due to high costs, and profitability gradually recovered in 23Q1. Under the influence of adverse external factors in '22, the revenue side maintained steady year-on-year growth. Among them, the sales volume of hemodialysis equipment and hemodialysis consumables was obvious. Sales increased 114% and 140%, respectively, and the blood purification sector achieved revenue of 787 million yuan, an increase of 17% over the previous year; rising logistics costs and rising raw material prices led to a decrease in product gross margin, and sales expenses increased 43% year on year. The sales expenses rate in '22 reached 13.81%, an increase of 3.32 pct over the previous year. Lower gross margin and increased investment led to a decline in net profit for the mother. The negative impact of the epidemic has abated, hospitals have accelerated the allocation of medical equipment, and the 23Q1 company's performance increased significantly year-on-year. As the external environment improved, the 23Q1 gross margin improved both year-on-year and month-on-month. The company's profitability has gradually recovered, and the company's 23-year performance is expected to reach an inflection point.
New products have been approved for listing one after another, and fund-raising capacity is progressing steadily. The company insists on product development and innovation, and has launched a number of new products: in '22, the company's P series patient monitors, transport monitors and other new monitoring products were approved one after another to help build medical resources; the D800 series hemodialysis equipment was the only pre-sale and post-sales dialysis model in the domestic market, opening up the blue ocean market; the certification of low-peritoneal dialysis products using polyethersulfone fiber membrane further enriched the company's blood purification product range; obtained the PD600 abdominal dialysis equipment registration certificate in early '23, and the company entered the field of peritoneal dialysis, actively promoting the promotion and popularization of abdominal dialysis in China. The company's fund-raising project progressed smoothly. Of these, 12 million dialyzer production capacity was transferred to Suzhou Junkang's existing plant, and construction efficiency was improved. It is expected that production will be put into operation by the end of '23, and the company will add a total of 20 million dialyzer production capacity, which is expected to bring new impetus to the company's performance growth.
Profit forecasting, valuation and rating: Considering that it will still take some time to repair the company's profitability and that cost investment will remain high, we lowered the company's net profit of 23-24 to $75/114 million (-26%/-26% from the previous value), and added 25-year net profit of 173 million yuan. EPS was 0.43/0.65/0.99 yuan respectively, and the current price of PE for 23-25 years was 38/25/16 times, respectively, maintaining the “buy” rating.
Risk warning: product and raw material prices fluctuate; industry growth falls short of expectations; fund-raising capacity expansion falls short of expectations; sales and promotion of new products falls short of expectations, etc.