Products cover multiple clinical departments, pioneers in domestic surgical power units

Xishan Technology is one of the pioneering enterprises that have carried out research and development and industrialization of surgical power devices in China. The company was founded in December 1999 and focuses on surgical medical equipment, especially in the field of minimally invasive surgical medical devices. It is mainly engaged in R&D, production and sales of surgical power units. Its main products include complete surgical power units, consumables and accessories, etc., covering various clinical departments such as neurosurgery, otolaryngology, orthopedics, and breast surgery. Revenue for the first quarter of 2023 was 67.4537 million yuan, an increase of 53.84% over the previous year; Guimu's net profit reached 239.496 million yuan, an increase of 106.09% over the previous year.

Market demand for surgical power devices is gradually opening up, and the number of winning bids for products ranked among the highest

Market demand for surgical power devices continues to grow rapidly. The number of successful bids for surgical power units increased year by year in 2019-2021. A total of 716 bids were won in 2021, an increase of 127 units over 2019, an increase of 21.56%.

According to statistics from Zhongcheng Mathematics, in 2019-2021, the total number of surgical power units won by the company's traditional departments ranked second, accounting for 16.60%, second only to Medtronic, and occupied a strong leading position in the domestic market. In 2021, the number of targets in the company's breast lesion rotary biopsy system ranked third, accounting for 18.75%, which is at the forefront of the industry.

Product performance partially surpasses foreign brands, and the trend of import substitution is obvious

Since foreign-funded brands entered the domestic market early, had strong technical and financial strength, and accumulated a good user base, the high-end market is currently mainly dominated by foreign-funded brands. As domestic technology and manufacturing continue to catch up, and with the promotion of import substitution policies, some parameters of the company's products have been able to reach the level of similar products abroad, and have even achieved innovation and transcendence. The number and share of domestic brands winning bids is increasing year by year. The share of domestic brands has already exceeded 30% in 2021. There is a trend of import substitution, and there is still plenty of room.

Research projects are abundant, and overall solutions for minimally invasive surgical tools are strategically arranged

Focusing on the strategic layout of minimally invasive surgery, the company has carried out 9 R&D pipelines, including surgical power improvement and upgrading, endoscopic camera systems, cold light sources, and ultrasonic cutting hemostasis systems. Using its own resources and advantages, the company focuses on independent R&D and industrialization of minimally invasive medical device technology from a multi-disciplinary, multi-technology and multi-angle level, enriching the company's product line and gradually expanding to surgical diagnosis, guidance and treatment fields such as endoscopes and energy surgical equipment, etc., to transform commercializable products.

Profit forecast and valuation: We expect the company's revenue for 2023-2025 to be 40/631/948 million, respectively, and the net profit of the mother is 122/203/305 million yuan respectively. Considering that the company's surgical power equipment has a lot of room for development in neurosurgery, breast surgery and other businesses, it was covered for the first time, giving it a “buy” rating.

Risk warning: Market competition risk, risk of disposable consumables and market penetration rate falling short of expectations, suspension of R&D projects, risk of new product development failure or failure to be recognized by the market, sales model risk, impact of volume procurement policies, risk of continued decline in product unit prices, and measurement of subjective risks.