[Investment points]
Overall revenue has increased significantly, and net profit has increased steadily. 23H1 Elken Medical achieved revenue of 649 million yuan, an increase of 22.10% over the previous year; net profit of 133 million yuan, an increase of 5.2% over the previous year. Among them, revenue from hip joint products was 341 million yuan, +4.2% year on year; knee product revenue was 211 million yuan, +64.7% year on year; spine and trauma products revenue was 50 million yuan, +10.8% year on year; revenue from customized products and services was 28 million yuan, +31.5% year on year; and revenue from other products was 118 million yuan, +107.5% year on year.
The production line blossomed at multiple points, and the amount of product released was remarkable. After collecting artificial joints, the company reported a total of 5,902 general hospitals. Compared with 2,405 new hospitals before collection, its market share in the joint market increased to 20.2%. Demand for 23H1's products continues to increase in surgical volume. Driven by new products such as single condylar, knee income has increased significantly. 23H1's initial joint product sales increased by 33.3%, of which initial knee joint sales increased by 107%. In terms of off-standard products, the company's single-condyle product revenue reached 33.775 million yuan, and domestic refurbished product revenue increased by 60%. In terms of spine, domestic 3D printing spine product revenue increased by 39.5%. Judging from the market share and product sales volume, the company's product, 23H1, has been released significantly, and the price-for-volume exchange plan after collection continues to improve.
The advantages of 3D printing lead innovative research and development to continue to improve. The company currently has 83 registration certificates for three types of medical devices, including 17 3D printing product registration certificates. In terms of joints, the metal 3D printing shin platform registration certificate obtained by 23H1 is a major breakthrough in 3D printing products for the knee joint. It officially introduced domestic knee products into the 3D printing era, narrowing the gap with international standards. In terms of spine and trauma, the company has also launched a series of new products based on 3D printing, including the Osteo Match biomechanically adapted intervertebral fusion device, Apollo self-stabilizing artificial vertebral body, TCBridge metal additive manufacturing matching long bone defect repair, and RetRuss metal additive manufacturing thoracolumbar fusion matching prosthesis system, etc., which have received market attention. 23H1 actively participated in the construction of a national orthopedic center, jointly built a 3D joint laboratory, carried out prosthetic and technical cooperation development, and filled gaps in the field. Furthermore, in terms of digital orthopedic products, the company's hip robot system and hip handheld navigation system are also expected to be certified in the fourth quarter of this year. The company's 23H1 R&D bureau has been further improved and upgraded iteratively on the basis of collecting and covering production lines. While driving joint product innovation with market demand, it has given full play to the advantages of 3D printing technology and developed differentiated and customized products to meet the needs of clinical differentiation.
Business expansion costs are well controlled, and profit levels have remained stable. 23H1's sales, management, and R&D expenses rates were 18.10%, 11.59%, and 10.22%, respectively, and -0.67 pct, +1.32 pct, and -0.02 pct, respectively. 23H1's gross profit margin and net interest rate were 61.90% and 20.44%, respectively, compared with the previous year, -1.83 pct and -3.29 pct, respectively. At the same time as revenue growth was significant, the company's rate control was good, and its overall profitability remained at a relatively stable high level under the impact of falling prices of collected products.
[Investment advice]
The company's revenue increased appreciably in the first half of the year, net profit increased steadily, and profitability remained at a high level.
With industry-leading 3D printing technology, the company continues to promote the development of innovative products. Both internal and external products have been significantly expanded in the context of collection, and the overall market share of joints and terminal hospital coverage have further increased. We gave the company 2023/2024/2025 operating income of 1,303/16.48/2.132 billion yuan, net profit of 257/327/438 million yuan respectively, EPS of 0.23/0.29/0.39 yuan respectively, and corresponding PE 25/20/15 times, respectively, giving the company a “increase in holdings” rating.
[Risk Reminder]
Risks of changes in centralized procurement policies
Foreign exchange risk