Main points of investment
On August 22, 2023, the company disclosed that 2023H1's operating income was 5.073 billion yuan, an increase of 14.4% over the same period last year, and its net profit was 459 million yuan, an increase of 42.3% over the same period last year. Of this total, the revenue in the second quarter was 2.634 billion yuan, an increase of 13.4 percent over the same period last year, and the net profit of returning home was 262 million yuan, an increase of 34.7 percent over the same period last year. 2023H1's gross profit margin and operating cash flow have been greatly improved, profitability and operating quality have risen steadily, and high profit growth for the whole year is expected.
Growth: focus on the steady growth of income in the main business and build a new growth curve overseas
The income increases steadily, and the proportion of the main business increases. 2023H1's revenue grew 14.4% year-on-year (Q2 increased 13.4% year-on-year), the revenue grew steadily, and the company focused on the main industry (medical devices, pharmaceutical equipment), and the revenue structure was significantly optimized. 2023H1 medical devices and pharmaceutical equipment accounted for 60.68% of revenue, increasing 2.51pct compared with the same period last year.
Since the company proposed to focus on the main industry and change from scale growth to benefit growth in 2018-2022, the company's two core sectors, medical devices (revenue share increased from 22% to 41%) and pharmaceutical equipment (revenue share increased from 8% to 16%), have steadily increased their revenue share, and 2023H1 has maintained a continuous upward trend. We believe that the company's medical equipment & pharmaceutical equipment sector has a wider space and higher gross profit margin. With the steady increase in the proportion of main business, the company's revenue and profits are expected to achieve higher growth.
Overseas expansion has achieved initial results, building a new growth curve. 2023H1's overseas newly signed contracts increased by 98% compared with the same period last year, and some products and some markets achieved zero breakthroughs: the Vietnam office to be established in 2022 realized the first non-PVC soft bag production line in Laos and the first peritoneal dialysis line in Vietnam in the first half of the year; the Egyptian office to be established in 2022 signed new orders in markets such as Morocco; and experimental animal products achieved export breakthroughs in the Russian market for the first time and signed FAT contracts. The Thai market achieved the first breakthrough in the series of high-end products such as STable-H8500 electro-hydraulic surgical beds; the first non-PVC membrane-based infusion production line was successfully delivered in the US market; and new markets such as Chile, Iran, Vietnam, Argentina and Bangladesh were developed for surgical instruments, which increased the export volume of the products. We believe that with the gradual expansion of the company's overseas channels, overseas is expected to form a new growth curve and open up long-term growth space.
Profitability: gross profit margin & net profit margin is expected to continue to rise
2023H1's gross profit margin and net profit margin continue to rise, which is expected to bring long-term performance release. 2023H1, the company's gross profit margin of 27.40%, increased 1.23pct compared with the same period last year, mainly due to the optimization of the company's income structure (higher gross profit margin of medical devices and pharmaceutical equipment). Benefiting from the increase in gross profit margin, 2023H1's net profit margin was 9.41%, an increase in 1.96pct compared with the same period last year. We believe that with the company's state-owned enterprise reform and equity incentives, continue to focus on the main business and improve efficiency, the company's net interest rate is expected to continue to rise in 2023-2025.
Operation quality: operating cash flow from negative to positive
The cash flow of 2023H1's operating activities is positive and has increased significantly. The net cash flow generated by 2023H1's operating activities was 302 million yuan, an increase of 369 million yuan over the same period last year. The cash flow of the company's operating activities changed from negative to positive and increased significantly, and the business quality improved significantly.
Profit forecast and investment suggestion
Based on the above analysis, we estimate that the company's operating income from 2023 to 2025 will be 107.12 121.91 billion yuan, an increase of 15.4%, 13.8% and 12.8% respectively over the same period last year. From 2023 to 2025, the company's parent net profit was 918,078 million yuan respectively, an increase of 52.61%, 19.71% and 17.43% respectively over the same period last year, and the corresponding EPS was 1.64 pm 1.97 PE (16 times PE in 2023), maintaining the "overweight" rating.
Risk hint
The risk that the implementation of the policy is not as expected; the risk that the commercialization of new products or market acceptance is not as expected; the risk of intensified competition in the industry; the risk that the target management of M & An is not as expected.