Mailand is the first national-level specialized and innovative “little giant” enterprise in the field of pelvic floor and obstetrics and gynecology rehabilitation. It has many independent intellectual property core technologies in electrical stimulation devices. In the early years, the reproductive rehabilitation and sports rehabilitation market, which relied on the pelvic floor to deeply cultivate an advantageous layout, has begun to become the “second growth pole”. In the context of the full life cycle of domestic women and increasing consumer medical demand, we believe that the magnetoelectric joint products listed by the company are expected to drive rapid growth in the pelvic floor and postpartum rehabilitation core business, and that strong product power+omnichannel layout makes the company have comprehensive competitiveness.
The product is not only a pelvic floor, but “walking on two legs” continues to innovate, and continues to be optimistic about future development revenue and profit: in 2018-2022, due to terminal demand affected by public health events, the company's performance fluctuated slightly. Revenue and net profit CAGR to mother were 27.3% and 21.50%, respectively. The company achieved total operating revenue of 377 million yuan (YOY 10.32%) in 2022. Among them, pelvic floor rehabilitation diagnosis and treatment equipment in hospitals is the company's core revenue source, accounting for about 54.52% of total revenue in 2022. We believe that since 2022, the company's new reproductive rehabilitation and sports rehabilitation products are still in the early stages of rapid release, and have gradually formed the company's second growth curve, which is expected to continue to contribute significantly to the rapid growth of the company's revenue.
Operating capacity and profitability: The company's investment in sales, R&D and management has increased year by year since 2021. In the first three quarters of 2023, the company's R&D expenses accounted for 14.76% of current revenue, the highest level in history. Net interest rates have declined as a result of rising expense ratios. The company's gross margin increased (from 68.55% in 2022 to 70.54% in 2023Q3) as all magnetic products were introduced into self-produced and self-developed reproductive anti-aging products with higher gross margins. We believe that the company's enhanced marketing and manufacturing execution systems and warehouse execution systems launched in May 2023 will also further optimize inventory management, etc., and their profitability (gross profit margin, net interest rate) and operational efficiency (accounts receivable turnover ratio, inventory turnover ratio) will be greatly improved and there is room for improvement.
The rehabilitation circuit is thriving, and women are paying more attention to health throughout the life cycle. Demand side: the industry is booming, and market penetration continues to grow. Frost & Sullivan expects China's rehabilitation medical device market to have a CAGR of 16.2% in 2018-2022 and grow to 61.6 billion yuan in 2023. (1) Late marriage and late childbearing and liberalized childbearing policies drive post-natal market demand. According to the relevant report released by Toubao Research Institute, China's post-natal rehabilitation equipment market had a CAGR of 43.9% in 2014-2018, and will grow rapidly at a CAGR of 29.7% thereafter. The market size is expected to reach 14.48 billion yuan in 2023. (2) Pelvic floor dysfunction disease (PFD) has a large prevalence base and low incidence rate, and clinical demand continues to grow. In 2020, Peking Union Medical College Hospital of the Chinese Academy of Medical Sciences indicated that the incidence of urinary incontinence among adult women in China was 30.9%, but the 5-year patient rate was only 7.9%. According to an estimated population of 1.41 billion in 2020, the current number of PFD patients in China is about 220 million. The prevalence of PFD is increasing with age, and as aging worsens, the future market prospects are very broad. (3) There is a lack of good products for reproductive rehabilitation, and sports rehabilitation has attracted much attention. The number of infertility patients among couples of childbearing age in China exceeds 50 million, accounting for 12.5% to 15% of the childbearing age population. The domestic assisted reproduction market has huge potential and reached 100 billion dollars. At the same time, every year, about 10 million abortions and 10 million people after delivery are in demand for good products in the field of reproductive rehabilitation. As far as the sports rehabilitation industry is concerned, China's market size increased from 8.737 billion yuan to 19.056 billion yuan in 2017-2021, with a CAGR of 21.53%.
Supply side: The gap is obvious, and favorable policies for future development are just around the corner. Whether in terms of the number of rehabilitation medical institutions, bed allocation, rehabilitation medical personnel reserves, etc., compared to China's huge rehabilitation demand population base, it is difficult for the supply side to meet people's rehabilitation needs, and there is huge room for development. Since the Ministry of Health issued a document in 2011 proposing the establishment of a complete three-level rehabilitation medical care system, the country has successively issued relevant policies to promote the construction of a rehabilitation medical system. The equipment requirements for rehabilitation medical devices are clear, and the scope of medical insurance payments has been gradually expanded, providing the industry with strong long-term growth space.
Leading pelvic floor electric stimulation equipment, the launch of multi-line intelligent products promotes high performance in the field of pelvic floor and postpartum rehabilitation: At present, the company has formed a comprehensive rehabilitation solution integrating quantitative evaluation of pelvic floor surface EMG, biofeedback treatment, electrical stimulation treatment, magnetic stimulation treatment, and postpartum psychological intervention around leading products. We believe that the market demand for pelvic floor and postpartum rehabilitation, which the company has focused on since 2023, is gradually recovering. With the promotion of the company's related academic activities and ideas, it is expected that the market space will be further opened up by expanding the audience structure and will maintain steady growth in the future.
In the field of reproductive rehabilitation: For people with infertility and premature ovarian function decline, the company launched electroultrasound therapy devices and ultrasonic uterine repair devices in 2020 and 2022, respectively. In 2021, the company's revenue from ultrasound equipment increased by about 53.80% year-on-year, and the gross margin level (74.62%) was higher than the company's original pelvic floor rehabilitation equipment. The market feedback for the new automatic uterine rehabilitation device launched in the second half of 2022 was good, driving the 2023H1 reproductive rehabilitation business revenue share to 12.36%, up 5.24% from 2022.
Sports rehabilitation field: The company's sports rehabilitation products are different from common rehabilitation concepts on the market. They use hand function and upper limb function rehabilitation as an entry point, and are mainly aimed at people with hand dysfunction such as cerebral palsy and post-stroke. In the first half of 2023, a new product, the hand functional magnetic stimulation system, was launched. The system combines soft hand function rehabilitation technology with transcranial magnetic stimulation to inject bidirectional opponent function from the central center to intervene, filling the gap in integrated central-peripheral closed-loop control technology and is expected to contribute to new growth momentum.
We believe that based on the company's investment in new production lines, in particular, a series of new products such as reproductive rehabilitation lines and sports rehabilitation lines, which are still in the early stages of rapid release, the company's second growth curve has gradually been formed, and it is expected that it will continue to contribute significantly to the rapid growth of the company's revenue.
Profit forecasting and valuation
We expect to achieve operating income of 4.3, 5.4, and 680 million yuan in 2023-2025, with a year-on-year increase of 14.5%, 25.3%, and 25.7% year-on-year net profit of 1.2, 1.7, and 220 million yuan, up -2.8%, 39.9%, and 30.1% year-on-year, corresponding EPS of 1.19, 1.66, and 2.16 yuan. The current stock price corresponds to PE 27.6, 19.8, and 15.2 times. As a leading enterprise in the field of female pelvic floor and postpartum rehabilitation, the company can continuously iterate core products and actively lay out the fields of reproductive rehabilitation, sports rehabilitation, and home rehabilitation. It has diversified market competitiveness and profitability. Referring to comparable company valuations, it was covered for the first time to give an “increase in weight” rating.
Risk warning
Market competition increases risk; failure to develop new products or marketing falls short of expectations; impact of policy events.