The current situation of the company
On July 20, the Centro Ruida Medical announcement disclosed the details of the ongoing related party transactions, and the company signed a general cooperation / general service agreement with the controlling shareholder Boston Science, involving commercial sales, manufacturing, R & D and other cooperation.
Comment
Cross-selling in domestic market and exclusive authorization in overseas market. According to the disclosure of the company: 1) in the Chinese market, Centro and Boston Science will cross-sell each other's products, and we believe that both sides are the leaders of peripheral intervention in the market. The sales teams of both sides are expected to produce good synergy in different regions and different levels, and continue to expand the influence of the brand. 2) in overseas markets, Boston Science will be the exclusive agent of Centrida products (the first batch of 11 products selected, such as knee ball, knee ball, peripheral suction system, radiofrequency ablation system, etc.), which will be registered and obtained by Centrida. Boston Science is responsible for sales. As of the announcement date, Boston Science has covered more than 36000 hospitals in more than 130 countries around the world. Boko estimates that the overseas market size of the 11 selected Coreda products will reach US $12-1.7 billion in 2025, and Boko expects to gain a market share of 10-20%. After taking into account the product climbing curve, exchange rate and price fluctuations, the two parties are scheduled to cap the total purchase amount of Boston Science from Synerida in 2025 at US $20 million / 50 million / 110 million respectively.
Research and development, manufacturing and other in-depth cooperation. 1) the two sides agreed to provide R & D support services to each other, ranging from preclinical to clinical trials, registration supervision and so on. We expect Boston Science to facilitate the launch of IDE clinical trials in the United States. 2) considering that Coreda has the advantage of local processing cost, Boston Science will purchase manufacturing services from Centrida, with an annual production capacity of 14-280000 units.
In the first half of the year, the peripheral operation recovered well and the collection landed in stages. Since February this year, with the clearance of disturbance factors, the number of peripheral interventional operations has increased well. In addition, in June this year, Hebei Sanming League's peripheral drug ball collection has ended 1, the first Ruida products successfully won the bid, the final price reduction is in line with our expectations. Although gathering will cause short-term disturbance to dealers' willingness to restock, we believe that the impact is controllable and will not last long. At present, no other provinces or alliances have made it clear that the next round of peripheral collection will be carried out, and we think that the collection pressure will be released in stages.
Profit forecast and valuation
Considering that the company needs to accelerate the overseas approval process of various products this year, which may incur certain registration fees, we reduce our 2023 net profit forecast by 30% to 70 million yuan, and introduce 2024 net profit forecast of 110 million yuan for the first time. The current price corresponds to a price / earnings ratio of 36 times 2024. Based on the optimism about the domestic and foreign market space for the company's innovative products, we maintain an outperform industry rating and target price of HK $23, corresponding to 55 times 2024 price-to-earnings ratio and 1.0 times PEG in 2024, which has 53% upside space compared with the current stock price.
Risk
Internationalization is not as expected, the progress of strategic cooperation is not as expected, R & D fails, and the price reduction is higher than expected.