Investment highlights
For the first time, Xianjian Technology (01302) was given an outperforming industry rating. The target price was HK$3.21, corresponding to a price-earnings ratio of 33/26 times 2023/24. The company is one of the leading companies in high-value consumables. The reasons are as follows:
Multi-track platform-based layout, innovation ushered in a harvest period. Xianjian Technology is one of the established companies for high-value consumables for medical devices. It has a rich product layout: 1) Peripheral vascular intervention: the barrier to aortic intervention is high, and the company is in the first tier, achieving full coverage of the head of the chest, chest, abdomen, abdomen, and iliac.
The iliac bifurcation stent in the blank area went on sale in 2021; the aortic arch field and the main thoracic and ventral region, which address clinical pain points, have a chimney/window/groove combination layout and main thoracic and ventral stent, respectively, have already entered clinical trials, and we expect that they will soon enter the harvest period. The market position of venous venous filters is stable, and there are also lower limb stents, medicine balls, etc., which are expected to share the rapidly growing lower limb market. 2) Structural heart disease:
The domestic market share of congenital heart disease blockers exceeds 30%, and global market coverage has been achieved. Overseas contributions are high, and they will advance in the direction of being degradable in the future. Left ventricular ear blockers account for 30% of China's share (2022), are approved for IDE testing in the US and are covered by medical insurance. We expect this product to be one of the company's main growth engines in the US and China markets. 3) Pacing Electrophysiology: In 2014, it collaborated strategically with Medtronic to help it complete the localization of the world's leading pacemakers and start a dual-brand sales model. MRI compatible pacemakers We expect to launch in 2024. 4) New direction: The company has been deeply involved in iron-based absorbable technology for nearly 20 years. By the beginning of 2023, IBS coronary stents had entered clinical phase 3; IBS Angel, a pediatric pulmonary stent, was marketed in Malaysia and Europe, and China initiated clinical enrollment; IBS Angel and IBS Titan lower limb stent were approved for “sympathetic use” by the US FDA. The company is also collaborating to deploy a liver cancer surgery robot, which is expected to be launched in 2023.
The inflection point on the domestic policy side has been reached, and overseas commercialization is worth looking forward to. Since 2H22, national spine collection, electrophysiological multi-provincial collection, and coronary stent contract renewals have been implemented moderately. We believe that medical device collection is becoming more moderate, and leading domestic companies are expected to continue to expand their market share. We expect that the fields that Xianjian Technology focuses on, such as aortic intervention, structural heart disease, and pacing electrophysiology, will also hopefully implement similar logic, which is better than market expectations. Furthermore, the company has established a mature international registration and sales team, which is expected to continue to promote overseas sales of innovative domestic products such as left ventricular ear blockers.
What's the biggest difference between us and the market? The market is still pessimistic about aortic collection. We believe that collection is becoming more moderate, and the barriers in the aortic sector are high. Domestic leaders are expected to exchange price for volume, and innovative products can also receive reasonable premiums. Xianjian is located throughout the aortic region, effectively filling clinical gaps.
Potential catalysts: the release of the left ventricular blockage, the progress of R&D and registration of various innovative products, and the implementation of collection.
Profit forecasting and valuation
We expect the company's EPS to be 0.08/0.10 yuan in 2023/24, respectively, and a CAGR of 19%. The current price corresponds to the price-earnings ratio of 25/20 times 2023/24. The first coverage gave an outperforming industry rating and a target price of HK$3.21, corresponding to the 2023/24 price-earnings ratio of 33/26 times, with room for a 30% increase from the current price.
risks
Procurement prices have been reduced, research and development has failed, the competitive pattern has deteriorated, new products have fallen short of expectations, and internationalization has fallen short of expectations.