Investment highlights
For the first time, it covered Jianshi Technology-B (09877) to give the outperforming industry rating. The target price was HK$45.00, based on the DCF valuation method (WACC 10.3%, sustainable growth rate 2.3%). The company is one of the leading domestic enterprises in the field of structural heart disease. The reasons are as follows:
The population of structural heart disease patients is huge, and the penetration rate of interventional treatment is expected to continue to increase. According to Frost & Sullivan data, the number of patients with moderate to severe valvular heart disease worldwide and China reached 150 million/25 million respectively in 2021, and there were 3090/11.6 million patients with heart failure. Minimally invasive transcatheter intervention is more effective than medication and safer than surgical thoracotomy. As technology upgrades, doctor training, and patient education gradually accumulate, we expect the penetration rate of transcatheter intervention treatment to continue to increase globally. Sullivan expects the global/Chinese structural heart disease interventional device market to reach 1317.4 billion yuan in 2025, respectively.
Jianshi Technology is the world leader in tricuspid valve intervention. The company's self-developed transcatheter tricuspid valve replacement (TTVR) product Lux-valve has a unique ventricular spacing anchoring method. It has shown excellent efficacy and safety in viable clinical trials, and has completed follow-up of all patients in confirmed clinical trials. The company expects 4Q23 to be approved for marketing in China. As far as current clinical progress is concerned, we expect Lux-valve to be the first two TTVR products approved for commercialization worldwide. Second-generation transvascular products have also entered the phase of confirmatory clinical trials. We expect Jianshi Technology to lead the innovation of the tricuspid reflux treatment paradigm, and the company's revenue is expected to increase rapidly starting in 2024.
Platform-based R&D capabilities, 12 products covering the main areas of structural core. The company is guided by unmet clinical needs and adheres to a differentiated layout and independent innovation. There are 12 products in various fields such as tricuspid valve reflux, mitral valve reflux/stenosis, heart failure, and cardiogenic stroke prevention. The company has platform-based R&D capabilities. Core technologies include anchoring method design, anti-calcification treatment, polymeric valve design, scaffold design, etc., and can continuously produce high-quality candidate products.
What is our biggest difference from the market? The market has yet to fully recognize the commercialization opportunities of tricuspid valve replacement. We are more optimistic about the long-term growth of this field and the company's comprehensive and differentiated product pipeline.
Potential catalysts: LuX series products have been approved for sale, and research and development of other innovative pipelines continues to progress.
Profit forecasting and valuation
We expect the company's EPS to be -0.97 yuan and -0.49 yuan respectively in 2023-24, covering for the first time. We gave the company an outperforming industry rating and a target price of 45 HK$45 based on the DCF model (WACC 10.3%, sustainable growth rate 2.3%), corresponding to 29% room for the current stock price.
risks
R&D progress has fallen short of expectations, commercial expansion has fallen short of expectations, the competitive landscape has worsened, the impact of policies on prices has exceeded expectations, and progress in internationalization has fallen short of expectations.