Event: In the first half of 2023, Elken achieved revenue of 649 million yuan, an increase of 22.1% over the previous year; realized net profit of 133 million yuan, an increase of 5.2% over the previous year.
Joint belt procurement drives import substitution: In the first half of 2023, hip joints achieved revenue of 341 million yuan, up 4.2% year on year, sales volume of collected covered joints (full hip joints) increased by 33.3%; total knee joints achieved revenue of 211 million yuan, up 64.7% year on year, and sales volume for initial knee joints (full knee joints) increased by 107%. The increase in revenue was mainly driven by the national procurement policy for joint implants and sales of hip and knee replacement internal implant products within the bandwidth range. Driven by new products such as single condylar, revenue from knee replacement implants has increased significantly.
The market share of spinal fusion products has further increased: in the first half of 2023, domestic 3D printed spine products achieved a revenue growth rate of more than 39.5%. In September 2022, the National Health Insurance Administration commissioned the Tianjin Joint Procurement Office to carry out a national spinal band procurement. The company's two brands of spine products, Ribel and Elken, won the bid. In March 2023, the whole country began to implement the winning bid results for volume procurement of spinal products one after another. Through leading 3D printing technology and rich product lines, the company provides clinicians with richer choices, enters more high-grade hospitals, accelerates import substitution, and increases market share.
3D printing customized products and services are growing rapidly: in the first half of 2023, the company achieved revenue of 28 million yuan for customized products and services, an increase of 31.5% over the previous year. In the first half of 2023, the company further utilized the technical advantages of 3D printing customized products and value-added surgical services to successfully develop a number of hospitals to carry out customized surgeries, and revenue from customized products and services increased significantly.
Investment suggestions: Domestic production takes the lead, and collection promotes the acceleration of import substitution. We expect the company to achieve operating income of 1,369/17.68/2,264 million yuan in 2023-2025, and net profit of 264/336/433 million yuan. The corresponding PE was 24.18/19.02/14.76 times, respectively, maintaining the “increase in weight” rating.
Risk warning: volume procurement renewal and price reduction exceeds expectations; raw material price increases exceed expectations; loss of core technical personnel