TAVR accelerates commercialization, and neurological intervention continues to be released
The company announced on August 31 that it achieved revenue of 225 million yuan, an increase of 89.3% over the previous year, in line with the previous profit forecast. The company's 1H23 revenue side performed well, mainly because: 1) TAVR accelerated commercialization, and its market share continued to rise (1H23 implants nearly 1,250 units, and the company's guide market share was over 20%). 2) Neural intervention products continue to be released, and new ischemic products have entered a commercial harvest period. Looking ahead to 2H23, we expect the number of TAVR surgeries to be driven to the next level by the +4Q peak season, and we are optimistic that Peijia will impact 22-25% of the market share of the industry throughout the year; combined with the continued release of Shenjie products, we predict the company's revenue of 488/79/ 1.46 billion yuan in 2023-2025. Using the DCF valuation method (assuming WACC 10.1%, continuous growth rate of 2.0%), we maintain Peijia's target price of HK$14.86 and “buy” rating.
TAVR sector: Market share continues to rise, and it is optimistic that operating efficiency will continue to be optimized. TAVR sector 1H23 achieved revenue of 108 million yuan (+106.8% yoy), mainly benefiting from elective surgical repair and completion of most hospitalizations (1H23 market share of 20% +). Looking ahead to the whole year, we are optimistic that revenue in this sector will continue to be strong, mainly because: 1) Considering 4Q as the peak period for TAVR surgery+regional health insurance coverage to stimulate penetration rate increase, we are optimistic that the industry's surgical volume will grow by more than 50%; 2) We are optimistic that Pei Jia's domestic market share will impact 22-25%, considering the company: a) Combining direct saling+distribution models to drive rapid product admission and release (1H23 admission to 120+ families); b) Second-generation TAVR has both radial support and recyclability, and has superior product strength; c) Supply chain/production/commercial production Continuous cost optimization and operating efficiency Continued increase (gross margin of the 1H23 division reached 87.1%, +8.9pct yoy). In the research pipeline: 1) third-generation TAVR is registered in multi-center clinical trials; 2) the shock wave product TaurusWave is in the FIM stage; 3) fourth-generation TAVR is in animal experiments; 4) Trilogy has multi-center registered clinical trials. We expect that they may be certified in the US/China in 24/25.
Neural intervention: Product segments have blossomed more, the revenue structure is diversified, and the 1H23 neural intervention sector has achieved revenue of 117 million yuan (+75.6% yoy), and the revenue contributions of the three categories of products tend to be balanced (hemorrhage/ischemia/pathway products revenue sector accounts for 27/39/ 33% of revenue). We conservatively predict that the sector's revenue in 23 years' YOY will reach 50% +, mainly due to: 1) hemorrhagic products, Jasper Spring Ring, the third place in Group A of the Jilin 21 Provincial League, won the bid, and are optimistic about speeding up admissions; 2) ischemic products are optimistic that the four new products launched in '22 will continue to be released during the year; 3) the next generation of microwire for vascular access products has been approved for sale, and we are optimistic that they will be released officially after the admission period.
TMV/TTV: Rapid entry into the research pipeline, innovative design creates technical potential to go overseas. We estimate that the Peijia 2/tricuspid valve pipeline is expected to hit nearly 2 billion yuan in sales in 2030, covering the following core issues: 1) HighLife (mitral mitral valve replacement) is a multi-center registered clinical registration; 2) GeminiOne (mitral valve repair) is registered in a domestic clinical setting. Recently, due to good clinical feedback, rapid enrolment (innovative independent valve capture and self-locking mechanism) in the US research); 3) MonarQ (three tips Valve replacement) FIM clinical trial (two cases of humanitarian use completed in Europe, company guidelines or US EFS research next year); 4) Sutra animal testing.
Risk warning: Risks related to hospital treatment volume, slow increase in TAVR market penetration, R&D risks.