Incident: The company released its 2023 three-quarter report. The first three quarters achieved operating income of 359 million yuan, a year-on-year decrease of 25.46%, net profit of 66.29 million yuan, a year-on-year decrease of 46.81%, and net profit of 46.81% year-on-year, net profit of 46.84 million yuan was deducted, a year-on-year decrease of 55.11%.
Collection and policies influence short-term performance, and continuous investment lays the foundation for long-term growth. Fluctuations in the company's revenue and profit in the first three quarters were mainly affected by the implementation of spinal collection and national policies. The number of terminal surgeries in various hospitals declined markedly, putting pressure on short-term performance. However, the company adheres to therapeutic innovation and actively invests in research and development. The R&D expenses for the first three quarters were 47.1 million yuan (+8.83%, same below), the company's 3D printed “metal additive manufacturing intervertebral fusion device” was registered and approved by the National Drug Administration, Zeus spinal system products were certified by the US FDA 510 (K), and all spinal stapling systems currently developed have obtained EU Medical Device Regulation (MDR) CE certification. On a quarterly basis, 2023Q3 had operating income of 76.7 million yuan (-58.51%), net profit of 3.37 million yuan (-92.97%), and net profit of 588,800 yuan (-98.43%) after deducting non-net profit of 588,800 yuan (-98.43%).
We believe that although spine harvesting affects the company's short-term performance, in the medium to long term, the company is expected to stand out from the competition with its innovative therapeutic advantages and rich international experience, and continue to expand global business. We are optimistic about the company's long-term growth.
Expense ratio: Gross margin is under pressure in the short term. The decline in sales expenses has led to a reduction in the three cost rates, and investment in R&D continues to increase.
Gross profit margin: gross profit margin for the first three quarters was 80.06% (-10.08pp), 23Q3 gross profit margin 67.27% (-22.64pp).
Expense ratio: The sales expense rate for the first three quarters was 39.91% (-8.06pp), the management expense rate was 6.21% (+1.35pp), the financial expense ratio was -3.19% (-1.94pp), and the total cost rate for the three categories was 42.93% (-8.65pp). 23Q3 sales expense ratio is 34.26% (-13.53pp), management expense rate 8.70% (+3.17pp), financial expense ratio -5.30% (-4.26pp), total cost rate of the three categories is 37.66% (-14.62 pp). R&D investment: R&D expenses for the first three quarters were 47.1 million yuan (+8.
83%), accounting for 13.12% of revenue (+4.13pp); 23Q3 R&D expenses were 17.27 million yuan (-4.30%), accounting for 22.51% of revenue (+12.75pp). The share of R&D investment remains at a high level.
Profit forecast and investment advice: According to the three-quarter report, considering the reduction in collection prices, the impact of national policies, and new business development, we adjusted the profit forecast. The company's revenue for 2023-2025 is estimated at 4.40, 5.16, and 620 million yuan (5.85, 6.91, and 831 million yuan before adjustment), with a year-on-year growth rate of -32.2%, 17.1%, 20.3%, and net profit of 0.95, 1.19, 1.
5.6 billion yuan (1.45 billion, 1.82 billion yuan before adjustments, 236 million yuan), year-on-year growth rates of -50.2%, 25.5%, and 30.4%. The current stock price corresponds to 55/44/34 times PE in 2023-2025. Consider that although collection has a short-term impact, the spine implantation consumables track is growing well. The company's backbone product development capabilities are leading, and its core competitiveness is outstanding. It is expected to benefit simultaneously from import substitution and increased market concentration. At the same time, the continuous expansion of service boundaries has led to continuous strengthening of comprehensive strength and maintaining a “buy” rating.
Risk warning events: risk of policy changes, risk of product quality and potential liability, risk of long-term R&D and market development of traumatic products falling short of expectations, risk of delays or untimely updates of disclosed information.