Summary of the report:

Event: the company released a 23-year third-quarter results report: Q3 achieved revenue of 97 million yuan (- 11.4%), net profit of 38 million yuan (- 24.9%) belonging to shareholders of listed companies, net profit of 38 million yuan (- 22.4%) attributable to shareholders of listed companies after deducting non-recurring profits and losses, and revenue of 322 million yuan (- 5.7%) in the first three quarters. The net profit attributed to the shareholders of the listed company was 148 million yuan (- 4.5%), and the overall performance was slightly lower than expected.

Comments:

Performance side: revenue and profits in the third quarter are slightly lower than expected, short-term performance is under pressure. 1) the product revenue structure remained stable in the third quarter; 2) the negative profit growth was due to a decrease in revenue (- 11.4%) on the one hand and an increase in cost structure on the other hand, in which the period fee (including R & D) was 49.7% (+ 7.0pct), which had a certain impact on the net profit margin.

Financial side: on the one hand, the relevant rates increased significantly in the third quarter, and the decline in net profit margin was similar to the increase in rates; on the other hand, in the first three quarters, gross profit margin and net profit margin increased slightly, and the range of changes in fees during the period was relatively narrowed. 1) in the third quarter, the gross profit margin is 90.6% (+ 1.0pct), the net profit margin is 39.6% (- 7.1pct), and the expense rate is 49.7% (+ 7.0pct), which is similar to the decrease in net profit margin. Among them, the rate of sales / management / R & D expenditure was 30.3%, 8.2% and 11.2% respectively, which was higher than that of the same period last year plus 3.6/+1.2/+2.0pct. 2) in the first three quarters, the gross profit margin is 90.4% (+ 1.7pct), the net profit margin is 46.1% (+ 0.6pct), and the sales / management / R & D / financial expense rate is 25.7%, 7.2% and 10.3%, respectively, compared with the same period last year. The change range is significantly narrower than that of the third quarter alone.

We believe that the decline in revenue is mainly due to the pressure on the performance of the short-term oral pipeline, and the competition at the channel end tends to be fierce. we expect the company to steadily increase its market share and stabilize the basic market by optimizing the market management strategy; the meningeal pipeline may be affected by the fluctuation of terminal operation volume, and the follow-up long-term effect still needs to be observed continuously. On the other hand, with the landing of sports medicine collection and the entry of Medtronic PLC Infuse into the Chinese market, the market share of bone repair materials containing bmp-2 factor is expected to increase rapidly and is optimistic about the company's active bone release forecast in 2024.

Profit forecast: the company's fundamentals are relatively sound, and the release of new active bone in 24 years is expected. Considering that the amount of implant collection is less than expected after landing, the growth rate of bone powder and bone model is lower than expected. We slightly downgrade the company's performance forecast for 2023-2025, and it is estimated that the company's return net profit in 2023-2025 will be 1.89 and 2.16 billion respectively, and EPS will be 1.05, 1.20 and 1.42 yuan, respectively. The current market capitalization will correspond to 26 times / 23 times / 19 times of PE, respectively, maintaining the "overweight" rating.

Risk hints: collection risk, core personnel loss risk, market competition is not as expected risk.