Performance is in line with expectations, and the impact of collection is gradually being clarified
In the first three quarters of 2023, the company achieved revenue of 1,125 billion yuan, a year-on-year decrease of 8.86%; net profit to mother was 98 million yuan, a year-on-year decrease of 54.03%. In the third quarter, the company achieved revenue of 376 million yuan, an increase of 4.89% over the previous quarter. The impact of trauma and spinal business collection was gradually digested, and product sales increased steadily. On the cost side, the company's sales expense ratio, management expense ratio, and financial expense ratio for the first three quarters were 36.35%/7.66%/-1.61%, respectively, maintaining a stable level. At the same time, the company actively increased investment in R&D to enable long-term performance growth. In the first three quarters of 2023, the R&D expenses rate reached 17.04%, an increase of 1.98 pct over the previous year.
Trauma collection bid renewal rules are moderate. Performance is expected to reach an inflection point. On September 26, 2023, the Beijing-Tianjin-Hebei Pharmaceutical Joint Procurement Platform released the “Announcement of the Proposed Selection Results for the Alliance's Orthopedic Trauma Medical Consumables Centralized Volume Procurement”. The collected price ranges for ordinary bone plate systems, locked compression plate systems (including universal direction), and intramedullary nail systems were 680-1,076 yuan/set, 780-1,362 yuan/set, and 1493-1696 yuan/set, respectively. Average price at the time of initial collection About 606 yuan, 987 yuan, and 1,271 yuan respectively, the price reduction was moderate. The varieties already collected by subsequent companies are expected to benefit from collection and achieve an accelerated increase in the coverage rate of medical institutions.
Diversified product matrices unleash profit flexibility, and international layout opens the ceiling for growth
The company is deeply involved in trauma and spine business, while actively expanding high-value medical consumables fields such as joint, neurosurgery, minimally invasive surgery and dentistry. In the first half of 2023, the company's joint segment achieved revenue of 58 million yuan, an increase of 104.46%; the minimally invasive surgery segment achieved revenue of 122 million yuan, an increase of 28.20% year on year; and the neurosurgery sector achieved revenue of 30 million yuan, an increase of 55.14% year on year. Business development continues to advance, and performance is expected to accelerate. In addition, the company has accelerated the development of overseas markets, and its products are exported to more than 60 countries and regions, including Australia, Russia, Ukraine, and Chile. In the first half of 2023, the company's overseas revenue reached 74 million yuan, a year-on-year growth rate of 101.39%, and the overseas market potential was gradually realized.
Profit forecasting
The company's revenue for 2023-2025 is 1,518, 20.02, and 2,621 billion yuan, respectively, and EPS is 0.46, 1.08, and 1.53 yuan respectively. The current stock price is 81.1, 34.4, and 24.2 times PE, respectively. The company is a leading enterprise in the orthopedic field with abundant category reserves. As collection policies become more mature and domestic replacement of orthopedic consumables accelerates, the company's performance can be expected to grow for a long time. The first rating gives a “buy” investment rating.
Risk warning
New product promotion falls short of expectations, impact of collection exceeds expectations, risk of further decline in product prices, intensifying market competition, rising raw material costs, industry policy and regulatory risks