Core viewpoints

The company issued a 2022 performance forecast, expected to achieve revenue of more than 1.028 billion yuan (year-on-year increase of more than 35%), net profit of more than 185 million yuan (year-on-year growth of more than 100%), the performance is in line with our expectations. In the short term, artificial joint collection policy implementation, accelerate import substitution, the company as the leader of the domestic joint industry, ushered in the inflection point of development. In the medium and long term, the company has a first-mover advantage in the field of 3D printing, and out-of-standard innovative artificial joint products are expected to expand quickly; at the same time, the company actively arranges digital orthopaedic platforms (navigation systems, surgical robots, etc.) and bone biomaterials. In the future, it is expected to maintain the leading position in the industry by virtue of strong research and development capabilities, channel advantages and brand advantages.

Event

The company issues a 2022 performance forecast.

On February 15, 2023, the company issued a 2022 performance forecast, which expects annual revenue to grow by more than 35% and net profit to grow by more than 100%.

Brief comment

The performance is in line with expectations, and the collection policy accelerates import substitution

According to the announcement, the company is expected to achieve revenue of more than 1.028 billion yuan (year-on-year growth of more than 35%) and net profit of more than 185 million yuan (year-on-year growth of more than 100%) in 2022. The company's income increase in 2022 is mainly due to the domestic implementation of artificial joint volume procurement policy since April 2022, accelerating import substitution, and hospitals have a strong demand for the company's products. At the same time, the company's rich product line, including 3D printing products, effectively meets the differentiated market demand and further promotes the growth of sales revenue. In addition, the company maintains relatively stable costs and expenses through effective cost control.

China's leading orthopedic joint company, with obvious first-mover advantages in the field of 3D printing, has four platforms: Beijing Aikang (joint, 3D customization), Changzhou Tianyan (joint, tool), British JRI (joint, international market), and Beijing Liebel (spine, trauma). The company has a perfect orthopedic product line and forward-looking R & D layout, overseas business covers more than 30 countries. In the national artificial joint collection, the company won the bid for hip and knee joint replacement for the first time. Since the implementation of the artificial joint collection policy in 2022, the import substitution of the industry has accelerated, and the trend of the company's products is obvious in terms of price and volume.

Since 2009, the company has laid out 3D printing implant products and established an iCOS innovative customized platform, which can provide services and products including preoperative planning, bone model printing, customized osteotomy guide plate, 3D printing customized implant products, covering joints, spine, trauma, bone tumor and other parts. In 2021, the company's revenue from customized products and services reached 23 million yuan, an increase of 303% over the same period last year, and is expected to continue to grow rapidly in the future. In addition, after the collection of hip and knee joints for the first time, the company has a comprehensive product layout in the off-standard markets such as renovation and early intervention, and the related products are expected to usher in a stage of rapid growth.

Profit Forecast and Investment rating

Reason for recommendation: in terms of policy, the negative impact of the national artificial joint collection policy on the company is gradually cleared, and the company as a joint leader is expected to usher in a performance inflection point. In the short term, the demand for elective surgery after the epidemic is expected to continue to recover, and the growth rate of joint surgery in 2023 is expected to be higher than the average of the past three years. As the leader of the domestic joint industry, the company won the bid in the collection, and was carried out in 2022. After the epidemic period, the company ushered in the inflection point of development.

In the medium to long term, the penetration of joint replacement surgery in China is still relatively low. In 2019, the number of joint operations per thousand people in China is less than that in the United States. The industry still has a lot of room for growth. The company has a first-mover advantage in the field of 3D printing, and the out-of-standard innovative artificial joint products are expected to expand quickly; at the same time, the company actively lays out digital orthopaedic platforms such as navigation systems, surgical robots and bone biomaterials. in the future, it is expected to maintain its leading position in the industry by virtue of strong R & D capabilities, channel advantages and brand advantages.

With in-hospital diagnosis and treatment gradually returning to normal in 2023, the growth rate of joint surgery is expected to be higher than the average of the past three years. Assuming that the market share of the company's traditional collection products further increases, the company's artificial hip joint plate income maintains a growth rate of about 28%, and the artificial knee joint plate income keeps about 27% growth; the company vigorously promotes customized products after collection, and the product volume is relatively fast, assuming that the revenue of customized products will maintain 100% growth in 2023; assume that the company's spinal trauma products will maintain 20% revenue growth after collection. Suppose the company's other products (mainly new products such as navigation systems) maintain 50% revenue growth in 2023. Taken together, the company's overall revenue can grow by about 30%.

It is estimated that the company's income from 2022 to 2024 will be 10.28,13.46 and 1.734 billion yuan respectively, with corresponding growth rates of 35.02%, 30.90% and 28.84% respectively, and net profit of 1.88,2.44% and 319 million yuan respectively, with corresponding growth rates of 102.84%, 30.12% and 30.69% respectively.

Risk analysis:

1) risk of industry policy change: at present, artificial joints have carried out a round of volume procurement at the national level, the implementation cycle is two years, and the contract may be renewed in 2024, and the change of renewal policy may affect the profit margin level of manufacturers' products. Due to the implementation of collection prices in various places in the first half of last year, there is a problem of high base in some areas in the first half of this year compared with the first half of last year, and the performance trend for the whole of this year is expected to show a trend of low before and high after.

2) the market competition aggravates the risk: there are more domestic artificial joint manufacturers, and the industry competition gradually intensifies, so it does not rule out that some small and medium-sized manufacturers take the market share with the help of the set, which leads to the further intensification of the market competition; because the winning price of the company is not high, if the company can not grasp the good market competition strategy, it should pay attention to the risk of whether the volume reaches the expectation.

3) R & D progress is not as expected risk: the company is currently developing digital orthopaedic platforms such as navigation systems, surgical robots and bone biomaterials, and there is uncertainty in the research and development of new products.

4) sensitivity analysis: there is a risk of a decline in gross profit margin of the company's collected products. Assuming that the company's gross profit margin falls from 60% to 58% in 23 years, the company's overall net profit decreases from the current estimate of 244 million yuan to 221 million yuan.