Incident: The company released its semi-annual report for 2023. Revenue for the first half of the year was 282 million yuan, down 4.86% year on year, net profit of 62.92 million yuan, down 17.92% year on year, after deducting non-net profit of 48.26 million yuan, down 32.75% year on year.
Spine collection affects short-term performance and is optimistic about long-term growth. In the first half of the year, the company was affected by the implementation of spinal collection and investment in some long-term strategic projects. Performance was under pressure in the short term, but with the advantage of winning high bids and innovative patented products and treatments, the company continued to expand sales and sink channels. The number of dealers and partner hospitals continued to increase, and product sales volume increased to a certain extent. On a quarterly basis, 23Q2 had revenue of 121 million yuan (-27.38%, same below), net profit of 28.26 million yuan (-35.01%), net profit of 17.61 million yuan (-57.28%) after deducting non-net profit of 17.61 million yuan (-57.28%). We believe that although spine collection affects the company's short-term performance, in the medium to long term, with its innovative therapeutic advantages and rich international experience, the company is expected to stand out from the competition, continue to enrich its product range, and expand its global business. We are optimistic about the company's long-term growth.
Gross margin is under pressure in the short term, and the decline in sales expenses has led to a reduction in the three cost ratios, and investment in R&D continues to increase. Gross profit margin:
The gross margin of 23H1 and 23Q2 was 83.53% (-6.76pp) and 80.95% (-9.00pp). The decline in gross margin was mainly due to several factors: 1) the reduction in collection prices; 2) With the implementation of spine collection and the strengthening of market expansion, the company's product sales increased, while supporting tools also increased, and tool amortization increased year-on-year; 3) The company had previously responded to the implementation of spine collection. In order to ensure timely supply of collection products, taking into account factors such as production equipment delivery and personnel training, etc. Expense rate: 23H1, 23Q2 The sales expense rate was 41.45% (-6.63pp), 32.59% (-14.58pp), the administrative expense rate was 5.54% (+1.10pp) and 6.55% (+2.53 pp), and the financial expense rate was -2.61% (-1.23pp) and -2.82% (-1.66pp). The decline in the three cost rates was mainly due to a decrease in the sales expense rate. R&D investment: 23H1 and 23Q2 R&D expenses were 29.83 million yuan (+18.19%) and 15.56 million yuan (+20.39%) respectively, accounting for 10.57% (+2.06pp) and 12.82% (+5.09pp) of revenue. The company continues to increase R&D investment, continuously accumulate therapeutic innovation capabilities, and consolidate its core competitive advantage.
Continue to strengthen medical and industrial cooperation and strategic cooperation to lay the foundation for long-term development. In terms of medical engineering cooperation, the company has further strengthened medical engineering cooperation and exchanges with medical institutions and clinicians, and carried out R&D, innovation and upgrading of the company's orthopedic products, mainly including updates and iterations of general lumbar spine products, registration and marketing of intervertebral fusion devices made of new PEEK materials, completion of the development of new minimally invasive spinal surgery positioning guide products and obtaining registration certificates, conclusion of minimally invasive internal fixation system development projects, completion of spinal orthopedics, fusion devices and bone cement screw internal fixation system development projects, etc. In terms of strategic cooperation, the company continues to promote international business development: 1) reached a strategic cooperation with SPINEART SA, focusing on BAGUERA-C artificial cervical disc replacement technology; 2) Relying on Implanet to continue to promote the development of international business, we will make every effort to promote the company's innovative therapeutic technology output.
Profit forecast and investment suggestions: According to the interim report, considering the impact of collection price cuts and new business development, we adjusted our profit forecast. We expect the company's revenue from 2023-2025 to be 585, 6.91 million yuan, and 831 million yuan (9.06, 11.77, 14 before adjustment.
1.4 billion yuan), year-on-year growth rate -9.9%, 18.2%, 20.3%, and gross profit of 1.45, 1.82 million yuan, 236 million yuan (2.58, 3.49 million yuan, 455 million yuan before adjustment), year-on-year growth rates of -23.8%, 25.1%, and 29.5%. The current stock price corresponds to 37/29/23 times PE from 2023-2025. Considering that although collection has a short-term impact, the spinal implant consumables track is growing well, the company's spine product development capabilities are leading, and core competitiveness is outstanding. It is expected that it will also benefit from import substitution and increased market concentration. At the same time, it is expected to benefit from import substitution and increased market concentration. At the same time, the comprehensive strength brought about by the continuous expansion of service boundaries continues to increase, and the “buy” rating is maintained.
Risk warning events: risk of policy changes, risk of product quality and potential liability, risk of long-term R&D and market development of traumatic products falling short of expectations, risk of delays or untimely updates of disclosed information.