Performance:
On October 25, 2023, the company released its third quarterly report for 2023, specifically:
2023Q1-3: the company achieved operating income of 332 million yuan, an increase of 53.19% over the same period last year, a net profit of 102 million yuan, an increase of 63.56% over the same period last year, and a net profit of 91 million yuan, an increase of 89.49% over the same period last year.
2023Q3: the company realized operating income of 112 million yuan, an increase of 35.80% over the same period last year, a net profit of 31.12 million yuan, an increase of 30.16% over the same period last year, and a net profit of 25.42 million yuan, an increase of 21.92% over the same period last year.
Growth analysis: "strong recovery" + "track expansion", optimistic about the medium-and long-term explosive business structure: the rapid release of demand in the new cycle of 2023 recovery, the company's performance ushered in a rapid rebound. In terms of business structure, magnetic stimulation business has surpassed electrical stimulation to become the most important growth support of the company since 2021. By the end of 2023H1, the revenue of magnetic stimulation products was 98.31 million yuan, an increase of 76.45% over the same period last year, accounting for 44.7% of total revenue, which is still the fastest growing sector of all important production lines. From the perspective of channel structure, the company's three major segments of business balanced development, we expect the company's mental and neurological rehabilitation to maintain rapid growth, pelvic floor and production and health to maintain steady growth. On the whole, the company continues to expand product lines, layout multi-track, magnetic stimulation, laser radio frequency, rehabilitation robots and other areas of emerging products have made expected progress: among them, rehabilitation robots have formed a more comprehensive product matrix covering the upper and lower limbs, which is expected to gradually improve market competitiveness and commercialization level, and bring continuous contribution to the company's medium-and long-term growth. In addition, according to the company's mid-2023 report, the pelvic floor functional magnetic stimulator and transcranial magnetic stimulator under the company's magnetic technology platform and the group biofeedback instrument under the electrophysiological technology platform have all completed the update iteration and conversion to the market, and have achieved good market feedback and sales performance.
New business can be expected: the matrix of energy sources such as medical beauty has been plump day by day. As of 2023H1, the company's energy source equipment has been gradually built into a relatively rich product matrix, products involving shaping magnetic, picosecond laser and radio frequency (privacy, lipolysis, anti-aging), etc., covering obstetrics and gynaecology, dermatology, medical beauty, life beauty and other scenes, pelvic floor, women's health, body and skin and other diversified needs. Among them, the plastic magnetic product has completed the FDA 510K registration certificate in March 2023 and is in the process of domestic registration; the high-frequency electrocautery instrument has successfully obtained the second-class medical registration certificate (February 2023, July listing); the semiconductor laser treatment instrument of the subsidiary Krida Laser has obtained the third-class medical registration certificate (March 2023), and the picosecond laser treatment apparatus is also in the registration process.
We expect that with the rapid release of demand in the new recovery cycle, the company's rehabilitation cornerstone business (mainly refers to pan-pelvic floor rehabilitation, including postpartum rehabilitation, anorectal, urinary, pelvic floor of middle-aged and elderly women, as well as mental rehabilitation, neurological rehabilitation and motor rehabilitation) will maintain rapid growth, and new products related to energy sources such as Meimei are expected to gradually make incremental contributions in 2024-2025. We are optimistic about the explosive power of the company's medium-and long-term growth under the strong recovery of the rehabilitation industry and the horizontal expansion of the track.
Profitability analysis: under product iteration and scale effect, profitability is basically stable.
Gross profit margin and net profit margin: 2023Q1-3, the gross profit margin of the company is 71.43%, the year-on-year reduction of 1.96pct, net sales margin of 30.65%, year-on-year increase of 1.94pct. We expect gross margin to be dragged down mainly by increased pressure from the rehabilitation competitive environment and the absence of economies of scale at the initial stage of the launch of new products, and we believe that the gradual release of new products will bring about economies of scale. and the continued increase in the proportion of high gross margin products (such as magnetic stimulation) is expected to slow down the downward trend of gross margin caused by increased competition in the industry.
Period expense rate: 2023Q1-3, sales expense rate 26.39%, year-on-year reduction of 2.10pct, still maintained at a high level, mainly due to the increase in corresponding market activities under the recovery of demand, management expense rate 9.97%, year-on-year reduction of 3.35pct. We expect that with the rapid expansion of sales scale and the basic completion of medical and beauty team building, the cost investment has gradually returned to the normal level, and the R & D expense rate is 12.57%. Year-on-year reduction in 4.33pct, we expect to be mainly related to the rapid expansion of revenue and dilution expenses. Looking forward to the whole year, we believe that with the rapid growth of dilution expenses in the company's business, the company's operating expense rate still has a downward trend, which is expected to lead to a small increase in net interest rate.
In addition, during the window of demand recovery, the company's operating efficiency improved significantly, and the accounts receivable and inventory turnover increased significantly compared with the same period last year. As a result, the net operating cash flow of 2023Q1-3 was 71.54 million yuan, an increase of 376.41% over the same period last year, and the net operating cash flow / net income of operating activities was 83.77% (34.96% for 2022Q1-3).
Profit forecast and valuation:
Taking into account the rapid release of demand in the rehabilitation industry in 2023, the company's cornerstone business rebound trend is obvious, and taking into account the company's medical beauty and other new business is expected to bring incremental contribution, we expect the company's EPS to be 2.28,2.93,3.82 yuan in 2023-2025, and the closing price on October 26, 2023 corresponds to 25.8 times PE in 2023, maintaining the "overweight" rating.
Risk hint
The volatility of the impact of equity incentives on apparent performance, the risk of decline in gross profit margin, the risk that new product sales are less than expected, policy events and so on.