Revenue increased 22% in the first half of the year, and knee joint volume was released at a high speed. Revenue of 649 million yuan (+22.1%) was achieved in the first half of 2023. Under the impetus of collection policies, import substitution was further accelerated. The rich product line effectively met the needs of differentiated markets and further promoted revenue growth. Net profit returned to mother reached 133 million yuan (+5.2%) in the first half of the year. By category, the number of hip joints is 341 million (+4.16%), and the number of hip and knee implants is recovering significantly, and new products such as monocular are driving growth. Spine and trauma products generated 50 million dollars (+10.8%), providing richer choices through leading 3D printing technology, entering more advanced hospitals, and increasing market share. The revenue from customized products was 0.28 million (+31.5%), a customized production order system was built, and a customized image database was built, and the ICOS orthopedic customization platform was continuously improved and matured. Overseas revenue reached 113 million (+78.3%) through active market development in the first half of the year.
The gross profit margin rebounded month-on-month, and the sales expense ratio declined year-on-year. The gross margin for the first half of 2023 was 61.9% (yoy-1.8pp), mainly due to the year-on-year decline in sales prices of hip and knee implant products within the collection range. The sales expense ratio is 18.1% (yoy-0.5pp). The company actively carries out market development and new product training. Related market expenses and sales staff labor costs have increased, but the revenue scale effect is further reflected. The management expense ratio is 11.6% (yoy+1.4pp), due to increased labor costs for management personnel and credit loss provisions calculated based on the age and balance of accounts receivable. R&D cost rate 10.2%, financial cost rate -2.2% (yoy+0.5pp). The net margin was 20.4% (yoy-3.1 pp), a significant increase over 22H2.
Position innovative technology to empower integrated experts and give full play to the technical advantages of 3D printed customized products. The company obtained a metal 3D printing shin platform registration certificate. This is another major breakthrough in knee 3D printing products, officially introducing domestic knee products into the 3D printing era. The company positioned innovative technology to integrate expert image, and launched a series of innovative products in the field of spine and trauma based on 3D printing technology in the first half of the year. In terms of innovative materials, biomedical ultra-high molecular weight polyethylene materials led by the company were shortlisted for the “Innovation Task Unveiling” project jointly organized by the Ministry of Industry and Information Technology and the Drug Administration to help localize high-end biomedical wear-resistant polyethylene materials. In terms of intelligent equipment, the company has obtained an orthopedic CT image processing software registration certificate, which can be used independently or in conjunction with joint replacement surgery navigation systems and surgical robot systems.
Investment advice: Profit forecast was slightly lowered. Net profit due to mother for 2023-25 is estimated to be 2.67/3.48/456 million yuan (originally 2.67/3.51/463 million), up 30.2%/30.6%/30.8% year over year; EPS is 0.24/0.31/0.41 yuan, and the current stock price corresponds to PE24/19/14 times. Currently, the penetration rate of joint surgery in China is low. In the future, the industry will maintain a high level of prosperity, clear procurement risks, be optimistic about the company's long-term growth potential, and maintain a “buy” rating.
Risk warning: the quantity of joint products released is lower than expected; risk of market competition; risk of contract renewal and price reduction.