1H23's performance met our expectations
The company announced 1H23 results: revenue of 110 million yuan, +42.9% year on year; gross profit margin of 72.7%, year on year +6.4 ppt; net loss of 54.34 million yuan, compared to a loss of 66.82 million yuan for the same period last year. The results for the first half of the year were in line with our expectations.
Development trends
Commercialization is smooth, and the pipeline layout is gradually being improved. In the first half of 2023, the company achieved revenue of 110 million yuan, +42.9% year-on-year. Among them, six core products, including remote access catheters, thrombotic stents, intracranial balloons, and spring rings, earned 96.67 million yuan in the first half of the year, contributing nearly 80% of revenue. In the first half of 2023, the company's four new products, including intracranial thrombus suction catheter, spring ring micro catheter, and balloon blocking catheter, were approved for marketing by the State Drug Administration. The company is improving its product portfolio in the field of thrombolysis and stenosis treatment, and strengthening the layout of stroke treatment and prevention. We believe it is expected that it will continue to improve its competitiveness. The company expects revenue for the full year of 2023 to grow 50% year over year.
Capital control and fee reductions are beginning to show results, and operating losses continue to narrow. The company said that the increase in gross margin of 1H23 was mainly due to the optimization of production processes, the steady decline in material and labor consumption per unit of product, and the scale effect and cost dilution brought about by the increase in sales volume. The company's total sales and management expenses rate for the first half of the year decreased by 31.6 ppt year-on-year, maintaining a continuous downward trend. The company expects R&D expenses to be controlled at around 110 million yuan this year, and 1-120 million yuan in the next few years. 1H23's net loss narrowed 19% year on year and 60% month on month. The company also expects to reach break-even by 2H23 or 2024.
Ongoing research projects are progressing steadily. As of 1H23, the company has obtained NMPA approval for 21 products, 2 products approved by the FDA, and 1 product will be CE certified. In the research pipeline, intracranial drug balloons have been submitted to NMPA for approval, and the first domestically produced spring ring auxiliary stent has entered the registration preparation stage. The company expects embolization stents, closed-net stents, and carotid artery stents to be approved next year. Respiratory intervention and active products have already entered clinical trials, and the company expects to launch in 2025. The company said it will continue to expand the comprehensive product layout and improve one-stop solutions to deepen the advantages of the product portfolio. We expect the company to continue the trend of domestically produced alternatives that benefit the field of neurological interventions.
Profit forecasting and valuation
We keep our profit forecast unchanged. We maintain our outperforming industry ratings. Considering the overall pullback in Hong Kong stocks and pharmaceuticals, we lowered our target price by 22% to HK$36, corresponding to 18 times the forward price-earnings ratio in 2026, which is 49% upward from the current stock price.
risks
The reduction in collection prices exceeded expectations, the competitive landscape worsened, commercialization of new products fell short of expectations, and R&D failed.