Revenue increased 33% in the third quarter alone, and net profit after deducting a significant increase in non-attributable net profit. Q1-3 of 2023 achieved revenue of 793 million yuan (+4.2%), net profit of 181 million yuan (-13.9%), net profit of 181 million yuan (-13.9%), net profit after deducting non-return net profit of 162 million yuan (-10.9%). Looking at a single quarter, Q3 achieved revenue of 251 million yuan (+33.3%), net profit of 55 million yuan (+3.5%), net profit of 55 million yuan (+3.5%), net profit after deducting non-return net profit of 51 million yuan (+106%). Q3 The growth rate of non-net profit in a single quarter was corrected for the first time after four consecutive quarters of year-on-year decline, indicating that the company is rapidly emerging from the impact of collection, benefiting from the increase in industry treatment penetration and the domestic production substitution process brought about after collection. There were government subsidies of 19.58 million in the same period in 22Q3, which led to higher apparent net interest rates.
There was a slight decline in gross margin, and a sharp drop in sales expenses. The gross profit margin of 2023Q3 is 66.9% (-5.0pp), which is expected to be related to the current processing of spinal channel inventory and restrictions on sales promotion of some products due to stricter industry regulations. The sales expense ratio is 26.7% (-13.0pp), the management expense ratio is 4.0% (-0.8pp), the R&D expense rate is 15.9% (-1.5pp), the financial expense ratio is -1.6% (+4.2pp), the net profit margin is 21.9% (-6.1pp), and the net profit margin is 20.5% (+7.2pp).
Firmly developing on a platform, sports medicine collection is expected to increase the company's market share. The company has made a corresponding layout for research and development of new materials such as porous tantalum, magnesium alloy, and PEEK, and has increased product research and development of new pipelines such as joint surgery robots, sports medicine, PRP (platelet rich plasma), and dentistry. The above strategic layout helps the company respond positively to collection and continue to expand new growth points. In mid-September, the “Notice on Centralized Procurement of Medical Consumables for Intraocular Crystals and Sports Medicine (No. 1)” was issued. The implementation of national procurement will help leading domestic enterprises increase their market share. As a leading orthopedic enterprise, the company will gather advantages, actively promote marketing network construction, and achieve long-term stable development within the orthopedic industry.
Investment suggestions: Considering the impact of spine collection execution and the macro environment, the profit forecast was lowered. The net profit forecast for 2023-25 is expected to be 275/3.62/473 million (originally 3.19/4.09/513 million in 2023-25), a year-on-year increase of -10.5%/31.3%/30.8%; the EPS is 0.72/0.94/1.23 yuan, corresponding to PE 41/31/24 times. Chunli Medical has established a high brand awareness and leading market position in the field of joint prosthetic products. It has used national procurement to increase its market share and consolidate its leading position. New pipelines such as sports medicine, PRP, and dentistry will become new growth points. Currently, the penetration rate of joint surgery in China is low, and the industry is expected to maintain a high level of prosperity in the future. Clear the collection risks, be optimistic about the company's long-term development potential, and maintain the “buy” rating.
Risk warning: The volume of joints and new products is lower than expected, there is a risk of market competition, and the risk of contract renewal and price reduction.