Incidents:

The company released its 2022 annual report and the first quarter report of 2023: in 2022, the company achieved revenue of 195 million yuan (yoy +26.96%); achieved net profit of 36 million yuan (yoy -19.73%), after deducting net profit of 24 million yuan (yoy +2.67%); achieved net operating cash flow of 48 million yuan (yoy -27.37%).

In Q1 of 2023, the company's revenue was 44 million yuan (YOY +19.35%), net profit of the mother was 08 million yuan (YOY +9.19%), net profit of the non-return mother was 0.06 million yuan (YOY +49.78%), and net operating cash flow was 119 million yuan (YOY +925.83%).

Comment:

1. The growth rate of the two main types of business in 2022 was impressive. Meningeal products increased 24% year on year, and cranial and maxillofacial repair products increased 31% year on year, driving the company's revenue growth.

In 2022, the company achieved revenue of 195 million yuan (YOY +26.96%). By product, the company's artificial hard brain (spine) membrane repair tablets and craniomaxillofacial repair systems were the company's main revenue sources, accounting for 74.09% and 19.36% of revenue respectively. In 2022, meningeal products achieved revenue of 145 million yuan (YOY +23.58%), and cranial and maxillofacial repair products achieved revenue of 38 million yuan (YOY +30.92%). Among them, meningeal products mainly include “Rui Membrane” and “Rui Kang”. “Rui Membrane” was rated as one of the “International Original” products in 2018 and is the only meningeal product in the catalogue; “Rui Kang” provides meningeal repair surgery solutions along with “Rui Membrane” as a new generation of meningeal products. The main cranial and maxillofacial repair products are “Sailu”. This product is one of the few repair products using PEEK material in China, and PEEK's replacement of titanium has become a trend.

2. Focusing on the field of neurosurgery, the “Four Technology Platforms+Multi-Level Research and Development Board” covers the entire product line and multiple departments, and product synergies play an advantage.

The company has established advanced manufacturing technology platforms such as bioadditive manufacturing technology, digital design and precision processing, selective oxidation and microfiber net forming, multi-component crosslinking and atomized rubber, etc., and has successfully developed a series of products, including meningeal products “Rui Membrane”, “Rui Kang”; skull products “Sailu”, “Bonari”, “Velu”, etc.; hemostasis products “Gisuting”; closed products “Ruigu”, which can meet the company's multi-product line layout and multi-department expansion in the field of neurosurgical implantation of medical devices Brace.

At present, the company has been approved to register 8 Class III and 1 Class II medical device product, and has registered 1 Class I medical device product. It has obtained CE certificates and CEDesign certificates for 4 products. Oral absorbable repair films and absorbable multi-layer fiber regenerated cellulose are in the clinical trial stage.

3. Foreign revenue increased 62.5% year-on-year in 2022, and the overseas marketing layout was further improved

In 2022, domestic and international revenue was 159 million yuan (yoy +20.99%) and 36 million yuan (yoy +62.51%) respectively. The company has strengthened specialized investment in market training and academic promotion, built a platform for global academic cooperation and exchange, and established relevant self-media operating accounts overseas to publish popular science or product promotion articles. The total number of readers has exceeded 34,000, gradually increasing the company's overseas brand awareness and influence. At present, the company has established good cooperative relationships with more than 700 dealers at home and abroad, and its products have entered more than 1,400 domestic hospitals; in terms of the international market, the company's products have covered more than 80 countries and regions such as Europe, South America, Asia and Africa.

Profit forecast: We expect the company to achieve net profit of 47 million yuan, 71 million yuan, and 110 million yuan in 2023-2025, up 29.97%, 53.25%, and 54.57% respectively over the previous year. The corresponding PE valuations are 61, 39, and 26 respectively. Considering the company's rapid growth, it was covered for the first time, and given a “highly recommended” rating.

Risk warning: New product development progress falls short of expected risks; market expansion and sales fall short of expectations; risk of product collection and price reduction exceeding expectations.