Recommended logic: 1) The orthopedic joint equipment market is growing steadily, and the domestic growth rate is relatively fast. The domestic joint device market is expected to reach 18.7 billion yuan in 24 years, and the CAGR for 2019-2024 is 16.9%, significantly faster than the global growth rate. 2) Joint procurement contract renewal is expected to continue the previous pattern. Elken Healthcare's hip and knee market share is close to 20%. It is expected that admissions will continue to be released after contract renewal. Especially in the knee field, the pre-procurement localization rate is low, and the subsequent domestic replacement process is expected to accelerate. 3) With years of product technology accumulation, R&D investment, and various forms of academic promotion, the company has trained more than 300,000 doctors, and has formed a leading domestic enterprise in terms of product strength, innovation, and channel power.
The orthopedic joint equipment market is growing steadily, and the time is right for domestic replacement. According to Statista data, joint products account for the highest share of the global orthopedic device market at 37%, followed by spine at 18%, and trauma at 14%. The domestic orthopedic device market is expected to exceed 60 billion dollars in 24 years, and the growth rate is significantly faster than the global level. Due to factors such as China's huge population base and increasing aging, the size of the domestic orthopedic market increased from 16.4 billion yuan in 2015 to 41.4 billion yuan in 2021. The CAGR was 16.7%, far exceeding the growth rate of the global market. In 2015-2019, the sales revenue of the joint implant market increased from 4 billion yuan to 8.6 billion yuan, with a compound growth rate of 20.7%. It is expected to reach 18.7 billion yuan by 2024, and the CAGR for 2019-2024 is 16.9%.
Joint collection contract renewal is expected to continue the previous pattern, and Elken Healthcare's share is expected to continue to rise. After the Joint National Harvest, Elken Medical's hip joint won the largest volume in the bid. Ceramics-polyethylene and alloy-polyethylene all ranked first in procurement demand in the first year of collection. Elken Healthcare's first-year demand share in national knee procurement was second in the market, accounting for about 13%. We expect that the 24-year contract renewal for joint procurement will continue the previous pattern, and Elken Healthcare's share is expected to continue to rise.
A joint leader that integrates product power, innovation power, and channel power. The company is currently one of the manufacturers with the most complete product line in the field of joints in China, and has obvious product advantages in some complex surgeries. Combined with 3D printing technology and computer-aided technology, it has become a leading integrated solution enterprise in the field of joints in China and the world.
In terms of hospital coverage, the number of hospitals covered by the company continues to grow, reaching 3,497 in '22. Among them, 3D-ACT solutions are widely used. As of 2020, more than 1,032 hospitals have used the company's 3D-ACT solution, and a total of 6,157 surgical designs have been implemented. At the same time, the company actively cooperates with hospitals to develop personalized treatment plans. After being proposed and approved by the hospital, the company can provide personalized rare disease treatment products for 3D printing applications. There were 4/20/31 cases in 14-16, respectively. Achieved revenue of 47 million yuan in 2022.
Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 0.17 yuan, 0.22 yuan, and 0.29 yuan, respectively. We believe that the company has become a leading domestic enterprise in the field of joints. The price of the knee product line is expected to rise in the joint procurement bid renewal, the localization rate will increase further, and the high value-added products are expected to be released rapidly, driven by new admissions in procurement. First coverage, giving a “hold” rating.
Risk warning: the risk that the competitive pattern of the industry will deteriorate; the risk that the ex-factory price of the product will drop sharply due to collection and exceed market expectations; the risk that product channel sales will fall short of expectations.