The company is a dominant enterprise in the domestic endoscopic diagnosis and treatment equipment industry, and has a complete product line. The "three trees" medical and industrial combination system is mature, creating the advantage of forward-looking innovation. With the strengthening of domestic and foreign sales channels, as well as the recovery of in-hospital endoscopic diagnosis and treatment, superimposed innovative varieties, 2023 is expected to become a long-term performance inflection point. With the continuous expansion and upgrading of the global endoscopic diagnosis and treatment market and the improvement of the localization rate, both inside and outside the company, the long-term development prospect is good. According to the comprehensive PE and DCF methods, the reasonable equity value of the company is 8.5 billion yuan, corresponding to the target price of 147yuan in 2023. for the first time, we give a "buy" rating.

Based on research and development, the achievement of endoscopic equipment consumables advantage enterprises. Founded in 2010, the company focuses on the R & D, production and sales of minimally invasive endoscopic diagnostic and therapeutic instruments. The products include hemostatic closure, EMR (endoscopic mucosal resection, Endoscopic Mucosal Resection) / ESD (endoscopic mucosal exfoliation, EndoscopicSubmucosal Dissection), biopsy, ERCP (endoscopic retrograde cholangiopancreatography, EndoscopicRetrograde Cholangiopancreatography), endoscopic diagnosis and treatment equipment, and so on. Among them, the proportion of high-end EMR/ESD income in the main business income continues to increase. From 5.70% in 2017 to 19.83% of 2023H1. In 2022, the company's operating income was 371 million yuan, accounting for 48% of overseas income. The compound growth rate of income from 2017 to 2022 was 32.53%. In 2022, the market share of domestic diagnosis and treatment consumables was leading, and it has grown into a domestic enterprise with the advantage of endoscopic equipment consumables. The company has established a global marketing network, based on the future market environment and industry demand, future development can be expected. The controlling shareholders are concentrated, employees hold a wide range of shares through a variety of ways, and the corporate governance structure is good.

The 100-year history of global endoscopic diagnosis and treatment consumables is young, and China is still in the period of popularization. Endoscopic diagnosis and treatment refers to the method of endoscopic treatment with the help of special instruments under direct peep or under the monitoring of screen imaging. Because of the advantages of less trauma and high accuracy, it has been widely used in the removal of diseased organs and tissues, absorption of secretions, removal of foreign bodies, dilatation and stenosis, injection of drugs and so on.

Endoscopy is the gold standard for the examination of digestive tract diseases, and the concept of "early diagnosis and early treatment" has become a consensus. According to Boston Scientific Statistics, the global market for minimally invasive endoscopic instruments is expected to be $5 billion in 2021 (excluding endoscopic equipment). According to our previous research report "soft Mirror: 10 billion scale acceleration, Import substitution just in time-one of the Special Topics of Medical Imaging diagnosis and treatment" (2021-03-14), the market size of endoscopic diagnosis and treatment equipment in China is 4.77 billion yuan in 2022, 11.42 billion yuan in 2030, and 11.6% in 2022-2030. We expect that with the popularity of soft mirror equipment and increased awareness of endoscopic screening for digestive diseases, assuming that the CAGR in 2030-2032 is 5.0%, it is estimated that the market size will reach 12.59 billion yuan in 2032.

The "three trees" medical and industrial combination system is mature, creating the advantage of forward-looking innovation. The company already has a complete product pipeline of endoscopic diagnosis and treatment instruments, the concept of technological innovation of "three trees", and has constructed a positive cycle of technology and channels. it has created and improved the R & D technology concept with clinical academic research, patent analysis and research and scientific and technological achievement research as the core, and built a forward-looking innovation advantage in many products, such as: 1) hemostatic clip: the company created original detachable technology to achieve even if misclamping occurs. It can also be demolished without damage. On this basis, the company has successfully developed the replaceable technology and continuous technology applied to the hemostatic clip. 2) High frequency incision: using the original bipolar loop technology, compared with the traditional unipolar technology, it has the advantages of small area of current flow through the human body, no need to use external negative plate, and avoid interference to other electronic diagnosis and treatment devices. therefore, it can effectively improve the safety of operation, reduce the cost of diagnosis and treatment, and expand the applicable population. At the same time, the company continues to optimize the process production process and supply chain management, collaborative economies of scale, bringing price advantages. High requirements for equity incentives (corresponding to year-on-year income growth of 35 per cent, 35 per cent and 35 per cent from 2023 to 2025), showing confidence.

Fund-raising analysis: expand production capacity, promote sales, strengthen research and development, and continuously enhance the competitiveness of enterprises. On May 19, 2023, IPO issued 14.47 million shares, accounting for 25% of the total share capital after the issue, with an initial price of 125.80 yuan per share, raising a total of 1.82 billion yuan. The funds raised (after deducting the issuance expenses) will be mainly used for: 1) the annual production of 10 million pieces of medical endoscope equipment and equipment project: help to expand production capacity, the implementation of this investment project is expected to comprehensively enhance the company's comprehensive competitive strength, promote the rapid growth of the company's business scale; 2) Marketing service network upgrade construction project: it is proposed to add new marketing outlets, optimize marketing channels and promote capacity digestion. 3) minimally invasive medical device R & D center project: it will build a multi-functional experimental R & D platform, carry out research and development of new products and new processes, and further enhance the company's R & D strength; 4) replenish working capital to meet the capital needs of the company's production and operation, enhance its risk resistance and enhance market competitiveness.

Risk factors: 1) the risk of industry policy change; 2) the risk aggravated by market competition; 3) the impact of the implementation of policies such as volume procurement on the company's operating performance; 4) the lower-than-expected risk of new product research and development; 5) the risk of core technology brain drain.

Valuation conclusion: Angus is a dominant enterprise in the domestic endoscopic diagnosis and treatment equipment industry. At the same time, we are optimistic about the long-term development prospect of the endoscopic consumables industry, the company will continue to expand its influence at home and abroad after the listing of IPO, continue to globalize its layout ability, and develop in the future. We expect the company's net profit in 2023 to 2025 to be 200 million / 260 million / 332 million yuan respectively, an increase of 38%, 30% and 28% over the same period last year. Combining the absolute valuation method (DCF valuation, WACC=7.24%,g=1.2%) with the relative valuation method (PE valuation, selecting Nanwei Medical as the comparable company and giving Angus 40 times PE valuation center in 2023), we estimate that the reasonable equity value of the company is 8.5 billion yuan, corresponding to the target price of 147yuan in 2023, and give the "buy" rating for the first time.