Regular business revenue grew steadily in '22, maintaining the “buy” rating company achieving revenue/net profit of 106.1/22.0 billion yuan (yoy -0.5%/+28.1%) in '22, exceeding our expectations (estimated revenue/net profit yoyy -5.7%/+22.3%). Excluding the impact of COVID-related products, the company's regular business revenue in '22 was +19.6% yoy. The company achieved net revenue/return profit of 2,44/60 billion yuan (yoy -4.4%/+9.4%) in 1Q23, mainly due to the high revenue base for COVID-related products in 1Q22 and the short-term impact of routine medical treatment in hospitals in the early stages of the 1Q23 epidemic prevention policy optimization. If stock payment fees and exchange gains and losses are excluded, the company's net profit from 1Q23 was deducted +15.6%. Considering the increase in the company's investment in promoting new products, we adjusted the net profit attributable to the mother in 23-25 to 2,451/29.02/3411 billion (value before 23/24 was 2,452/2,962 billion yuan). The company is a platform-based enterprise. It is expected to achieve quality improvement and accelerated development under innovation and international two-wheel drive. The company was given 23x PE for 23 years (comparable to the company Wind's average expected average of 20x), adjusted the target price to 29.97 yuan (previous value of 29.79 yuan), and maintained “buying”.
1Q23 Gross margin is rising steadily, and attention is still being paid to R&D
The company's gross margin for 1Q23 was 67.0% (yoy+3.2pct). We speculate that it was mainly due to the increase in revenue contribution from conventional products and that its gross margin was relatively high. The company's sales/management/R&D expenses ratio in 1Q23 was 18.1%/7.9%/9.4% respectively (yoy-0.4/+1.0/+1.1pct). The company continued to increase R&D investment and focused on promoting new product research and development in the fields of cardiovascular implantation, electrophysiology, heart failure, health management, consumer medicine, etc.
Innovative cardiovascular intervention products are leading the growth, and I am optimistic that development will continue to improve in '23 1) Devices: Achieved revenue of 5.88 billion yuan (yoy -4.7%) in '22. If the impact of COVID-19 testing products is excluded, revenue from conventional devices is +35.6%. The company's innovative portfolio of cardiovascular intervention products (biodegradable stents, pharmaceutical balloons, cut balloons, etc.) performed well, earning yoy +43.6% in 22 years. Looking ahead to the full year 23, considering the company's rich device product layout and excellent product strength, combined with the continuous recovery of in-hospital diagnosis and treatment, I am optimistic that sector revenue will grow rapidly; 2) Pharmaceuticals: achieved revenue of 3.44 billion yuan (yoy +5.5%) in 22, optimistic that sector revenue will achieve steady growth in 23; 3) Medical services and health management: achieved revenue of 1.29 billion yuan (YOY +4.9%) in 22. If the impact of COVID-related business is excluded, the sector's regular business revenue is YOY +11.7%, considering the continuous optimization of epidemic prevention and control, optimistic that the sector will achieve growth in 23 speed development.
R&D innovation is progressing steadily to further enrich product layout
The company is developing abundant pipelines and is gradually entering the harvest period: 1) Cardiovascular equipment: FFR, pressure microcatheters, and peripheral cutting balloons have been approved for sale; pulsed sonic balloons, degradable PFO blockers, etc. have been registered; TAVR, mitral valve clip repair systems, coronary rapamycin drug perfusion balloons, peripheral stents, cryoablation balloons, renal artery ultrasound ablation systems, etc. have entered the clinical stage; 2) Consumer medical products:
Dermatological smeable hydrotherapy solutions, ophthalmic OK lenses (fine eyes), and dental invisible orthodontic braces have been approved for marketing, and dermatological polylactic acid dermal fillers, etc. are already in the clinical trial stage; 3) Endoscopy: ultrasound diagnostic equipment for gastrointestinal endoscopy has been approved for marketing, and development of other related products is progressing in an orderly manner.
Risk warning: Product sales fall short of expectations, R&D progress falls short of expectations, and price reductions in reagent tenders.