Incident: The company released its 2022 annual report and the first quarter report of 2023. The company achieved revenue of 10.609 billion yuan (-0.47%) for the full year of 2022, net profit of 2,203 billion yuan (+28.12%), deducting non-net profit of 2,142 million yuan (+15.50%), EPS of 1.17 yuan, and operating cash flow of 2,791 million yuan (-8.86%). The company achieved operating income of 2,437 million yuan (-4.39%), net profit of 597 million yuan (+9.45%), net profit of 562 million yuan (+2.78%) after deducting non-net profit of 562 million yuan (+2.78%), and operating cash flow of -134 million yuan (-129.89%).
Regular business maintained steady growth, and innovative products drove the growth of the machinery sector. The company's medical device sector achieved revenue of 5.879 billion yuan (-4.70%) in 2022, mainly due to the large emergency product base in the same period last year. After deducting related impacts, the company's regular business revenue increased 35.64%. Among them, coronary implant intervention and structural heart disease business contributed a lot. Peripheral implant intervention, cardiac rhythm management and electrophysiology have not yet been scaled up. As production lines are gradually enriched, revenue contribution is expected to gradually expand. The cardiovascular implant innovation portfolio achieved rapid growth of 43.60% throughout the year, and the proportion of traditional coronary metal stents affected by collection continues to decline. Despite the influence of factors such as a high base during the same period and the incomplete recovery of the retail side, the company's Q1 revenue in 2023 declined only slightly. Excluding the impact of equity incentive amortization and exchange rate fluctuations, non-net profit increased 15.61% year-on-year, indicating that the company's business recovered rapidly in Q1, and the overall operating situation was better than previous market expectations.
The consumer medical production line is progressing steadily, and new growth is extremely certain. The company's medical services and health management segment achieved revenue of 1,293 million yuan (+4.91%) in 2022, while excluding emergency products, an increase of 11.73%. In recent years, the company has focused on planning and layout in the field of consumer medicine, and has launched products in the fields of dermatology, ophthalmology, and dentistry, and many major products are still in the development/application stage (such as corneal contouring lenses, water light acupuncture, facial acupuncture, etc.). We believe that the consumer medicine market is broad. As the company commercializes various new products one after another, the sector is expected to achieve rapid growth in the future, gradually becoming the company's third pillar after medical devices and pharmaceuticals.
Overseas registration and channel layout are smooth, and I am optimistic that international business development will accelerate. The company's overseas sales products mainly include coronary channels, blockers, in vitro diagnostics, staplers and APIs. In 2022, 33 CE certifications were added, and the products were sold in 150+ countries/regions. The company's overseas revenue in 2022 was 1,081 million yuan (-71.25%), accounting for 10.19% (-25.08pct). The decline in scale and share was mainly affected by differentiated domestic and foreign demand for emergency products. If we only consider regular business, we believe that the company's share of overseas business has increased significantly compared to before. Furthermore, the company plans to set up R&D, BD centers and production bases overseas to establish and improve sales/distribution networks, which is expected to promote the continuous expansion of overseas business in the future.
Integrate innovation to enhance the competitive strength of products, and the market penetration rate is expected to increase further. The company has R&D platforms in various fields such as active equipment/passive consumables/bioengineering/degradable materials/artificial intelligence, and innovates medical device products through platform-based technology. Among them, technology applications in the field of artificial intelligence can effectively solve clinical pain points. Currently, the company has focused artificial intelligence medical applications on vital signs monitoring (ECG, blood pressure) of patients with chronic diseases, blood biomarker testing (blood sugar, creatinine, urea nitrogen, etc.), and medical imaging applications related to cardiovascular implantation intervention (DSA, ultrasound), which can interpret electrocardiograms and provide reports to improve patients' compliance with blood sugar sexuality , supports functions such as no calibration of blood sugar products, increased sensitivity, and real-time acquisition of data required for individualized dialysis. The main products involving artificial intelligence include the ECG analysis software AI-ECG Platform, the non-invasive NeoGlu AI blood glucose meter, and intelligent cardiac ultrasound assistive software.
As of 2022, the subsidiary Lepuyun's artificial intelligence related equipment and services had achieved cumulative revenue of 590 million yuan.
Investment advice: The company is a domestic platform-based cardiovascular leader. Technological innovation drives continuous enrichment of production lines. Currently, it has basically escaped the influence of collection, and strategically laying out the consumer medical sector is expected to form a new growth pole. We expect the company's net profit to the mother in 2023-2025 to be 2,544/30.69/3.689 billion yuan respectively, up 15.47%/20.66%/20.20% year-on-year, and EPS is 1.35/1.63/1.96 yuan respectively. The current stock price corresponds to PE 18/15/12 times 2023-2025, giving it a “recommended” rating for the first time.
Risk warning: Risk of product commercialization falling short of expectations, risk of overseas expansion falling short of expectations, risk of R&D progress falling short of expectations.