Key points of investment

Domestic consumables and medical service businesses have resumed rapid growth. The company released the first quarter report of 2023, achieving revenue of 223 million yuan (-22%), net profit of 34 million yuan (-52%), and net profit of 33 million yuan (-47%) after deducting non-return mother's net profit.

The decline in performance in the first quarter was mainly due to COVID-19 demand in 202Q1, which led to a sharp increase in safety syringe sales. Sales in a single quarter far exceeded the 2-4 quarters of 2022. The 2023Q1 performance is expected to come mainly from two aspects: 1) demand for medical services grew rapidly after the COVID-19 pandemic ended, high-end medical services were released at Boao Hospital, and the number of beds in the new Ezhou Second Hospital was increased; 2) safety syringes and pre-filled catheter irrigators began to be sold in the domestic market. The service and equipment business is expected to continue to improve from quarter to quarter.

Boao Hospital resumed rapid growth, and the new hospital area of Ezhou No. 2 Hospital began operation. Boao International Hospital has departments such as the International Regenerative Medicine Research Center, the High-end Medical Aesthetic Center, the Center for Precise Tumor Prevention, the Anti-Aging Medical Center, and the Health and Physical Examination and Evaluation Center. The performance of Boao Hospital is expected to be released quickly after the epidemic. The Ezhou Second Hospital, which holds 100% of the shares, has moved to a new hospital area. The number of beds has increased from 300 to 1,000. Historically, the annual revenue of a single bed has been about 500,000. More experts and high-end equipment have been introduced to the new hospital area. It is expected that the annual revenue of a single bed will reach 600,000, and peak revenue is expected to reach 600 million. According to 15% net interest rate estimates, the peak net profit is expected to reach 90 million.

Safe syringes and pre-filled catheters release volumes quickly, and new large infusion products can be expected to be marketed. The domestic safe syringe market has just started, and the penetration rate is extremely low. The company's products have been connected to the Internet in 22 provinces and cities, and are about to enter high-speed distribution. Sales are expected to reach 50 million units in 2023, with a peak of hundreds of millions. Prefilled catheter irrigators have been connected to the Internet in the vast majority of provinces and cities. Increased market penetration rate+domestic substitution is expected to usher in rapid release. Big Infusion's new products, sorbitol mannitol rinsers and balanced salt rinses, are expected to bring new performance growth points.

Investment advice: We forecast that the company's net profit for 2023-2025 will be 2.03/306/410 million yuan respectively, with a growth rate of 490%/50%/34% respectively, and the corresponding PE of 30/20/15 times, respectively. The production capacity of the company's hospitals was released rapidly, and the volume of safe syringes and pre-filled catheters was released rapidly. Performance ushered in a period of rapid growth, maintaining the “increase in holdings” proposal.

Risk warning: hospital treatment volume is lower than expected; product sales are lower than expected; medical insurance collection has led to product price reduction.