3Q23 performance has shown a marginal recovery trend.
Company 1-3Q23 realized income of 1.486 billion yuan (yoy-26.6%) and net profit of 424 million yuan (yoy-51.5%), of which 3Q23 realized income / return net profit yoy+0.5%/+16.6%,. We speculate that the main reason is that the company continues to adjust its marketing management model, but 3Q23 has improved marginally (VS2Q23 income / return net profit yoy-48.7%/-80.4%). Taking into account the continuous promotion of the company's marketing reform and the existence of a certain cycle of new product sales volume affecting revenue growth, and superimposed changes in sales structure and rising production costs affect gross profit margin, we adjust the 23-25 year EPS to 0.72 shock 1.05 yuan (the previous value 1.32 pounds 1.59 pounds 1.89 yuan). The company is the domestic leader in the field of hemoperfusion, with excellent core technical strength and extensive commercial network coverage, giving a 24-year valuation of 29x PE (comparable to the company's wind consensus expected average value of 26x), corresponding to the target price of 25.23yuan (the previous value is 37.04yuan), maintaining the "buy" rating.
Continue to increase investment in product promotion and research and development, cash flow level to further improve the company's 1-3Q23 gross profit margin of 80.7% (yoy-2.6pct), we speculate that the main reason is that the proportion of relatively low gross margin products such as blood purification equipment and dialysate increases the price of upstream raw materials. 1-3Q23 sales, management, R & D expense rate is 29.7% 7.6% yoy+6.9/+3.0/+3.9pct, the company continues to increase product promotion efforts and still attaches importance to R & D investment. The net cash flow of 1-3Q23 operating activities is 590 million yuan (yoy+12.4%), and the cash flow level is steady and good.
It is optimistic that the company's core products will return to the growth track after the internal optimization adjustment. We speculate that the company's core products such as hemoperfusion 1-3Q23 revenue has declined compared with the same period last year, mainly due to internal marketing reform affecting the sales rhythm of core products. The company's core products have high industry recognition, rich evidence-based evidence and continuous promotion of new products, including: 1) High industry recognition: as of 1H23, the company's nephrology and liver products have covered more than 2000 hospitals respectively. 2) evidence-based evidence is sufficient: as of 1H23, nephrology KHA series products have been recommended by domestic experts, important research achievements of nephrology HA series products have been officially published, liver DPMAS has been recommended by relevant domestic guidelines for the first time and important clinical research results have been published. 3) New product promotion: nephrology KHA series new products 1H23 into yoy+57.6%. We are optimistic that the sales of the company's core products will return to the growth track after the internal adjustment.
Continue to expand product categories and application scenarios, continue to contribute to the incremental performance of the company continues to expand critical illness, poisoning, autoimmunity and other diseases, and strengthen the promotion of new products such as perfusion, dialysate, blood purification equipment, including: 1) urgent and severe: the company's critical products have covered more than 1600 hospitals as of 1H23. We are optimistic about the continuous increase in the penetration rate of the products accompanied by therapy. 2) Blood purification equipment: the company's products have advanced performance and various types, among which the star product DX-10 blood purification machine has covered nearly 1300 hospitals in China as of 1H23, with a total installation of about 3000 units, and its 1H23 income is 195 million yuan (yoy+190.1%). We are optimistic that the company's new products will continue to contribute to the performance increment.
Risk hint: the sales of the core products are not up to expectations, and the price of the products is reduced by bidding.