Key points of investment

Incident: In 2022, the company achieved operating income of 837 million yuan (-23.78%, same as below), achieved net profit of 34.47 million yuan (-76.63%), and achieved net profit of 17.33 million yuan (-84.37%) after deduction. The actual performance was consistent with the January 31 earnings report, which was in line with our expectations.

The epidemic affected medical service performance. Boao International Hospital continued to introduce advanced pharmaceutical equipment+the construction of the Ezhou Second Hospital was completed. 23 ushered in an inflection point: In 2022, Ezhou Second Hospital and Boao International Hospital's in-hospital medical treatment business were all affected to varying degrees. The medical service sector achieved revenue of 220 million yuan (-10.94%), of which Boao International Hospital earned 120 million yuan and Ezhou Second Hospital 100 million yuan. We believe that with the implementation of “Class B tube B”, the hospital-side diagnosis and treatment business ushered in a rapid recovery. Boao International Hospital is located in the Lecheng Medical Pioneer Zone, enjoys first-try privileges, and has introduced cutting-edge global pharmaceutical devices such as Inkseilan, Putomani tablets, and Germany's IN300 blood purification equipment. Furthermore, Boao International Hospital has strong professional teams in Japan such as Oda Jihan, etc., and its competitiveness continues to increase in 23; the new Ezhou Second Hospital has begun trial operation, and the bed utilization rate continues to increase., we expect the income of the new and old hospitals of Ezhou No. 2 Hospital, Profit peaks reached 600 million yuan and 100 million yuan respectively.

The decline in medical device revenue dragged down apparent growth, with domestic volume and completion of pre-filled washer capacity construction to help open a new growth point: in 2022, overseas RTI companies' safety syringe orders fell +overseas subsidiary LINEAR's COVID-19 business contraction and revenue decline dragged down the growth rate of the medical device sector. The medical device sector achieved revenue of 340 million yuan (-42.01%). In 2023, as the company's “annual production of 250 million prefilled catheter irrigators project” was fully completed and put into operation, and the domestic safety injector construction of the safety injectors channel was completed With the increase in popularity, prefilled irrigators are expected to drive the company's medical device revenue to a new level, and domestic sales of safe syringe products are expected to grow rapidly.

The divestment of non-performing assets has been completed, and the first equity incentive for the future company after lightweight IPOs has been superimposed may usher in ultra-rapid growth: the company's profit side has declined a lot, mainly due to falling medical device revenue compounded by reduced investment income and further calculation of bad debt preparations for accounts received from Shao Pin and Yuncheng New Friendship Hospital.

In 2023, the company's early non-performing assets were divested, and the three-year compound growth rate was expected to be achieved; on March 31, 2023, the company issued an equity incentive plan, the first equity incentive after listing. A total of 42 people were incentivized. The corresponding assessment year for the three fiscal years 2023-2025 was 2023-2025. Performance assessment targets: net profit of 2023-2025 was not less than 1.8/23/30 billion yuan respectively, and the three-year compound growth rate was 30%. The exercise price is 12.01 yuan, which is comparable to the company's current stock price, demonstrating the company's strong confidence.

Profit forecast and investment rating: We are optimistic about the company's potential and development on the medical service circuit, maintaining the company's net profit of 199/270 million yuan in 2023-2024, and the estimated net profit of the company to the mother in 2025 is 3.9 billion yuan, and PE corresponding to the current market value is 35X//24X/17X. Maintain a “buy” rating.

Risk warning: If the promotion of new products falls short of the expected risk, the recovery of the hospital side falls short of the expected risk, etc.