Incident: The company released its 2023 performance report. The annual revenue, net profit to mother, and net profit after deducting non-return to mother were 4.62/1.36/ 122 million yuan, respectively, +43.72%/45.41%/58.90% over the same period last year. Excluding the impact of share payments and income tax, net profit attributable to mother was 153 million yuan, +64.02% YoY. It is expected that the equity incentive target for this year has been achieved. The results are in line with market expectations.
Comment:
Q4 performance grew steadily, with annual profitability rebounding: 23Q1-Q4 achieved revenue of 0.96/ 1.24/1.12/130 million, respectively, in a single quarter, +77%/55%/36%/24%; net profit to mother of 0.30/0.40/0.31/0.35 billion yuan, +77%/91%/30%/10% YoY; net profit of 0.26/0.39/ 0.25/ 0.31 billion yuan, YoY +191%/117%/22%/8% YoY. The slowdown in revenue growth in 4Q23 is estimated to be related to internal and external industry shocks; the profit side growth rate was less than that of the revenue side, which is estimated to be related to an increase in share payment charges. The company's revenue reached a record high in 2023, and profitability rebounded from the previous year. In 2023, the company's net interest rate to mother and net interest rate after deducting non-return to mother were 29.5%/26.3%, respectively, +0.3 pp/2.5pp year on year. Net sales interest rate excluding share payments and income tax was 33.1%, +4.1pp year on year.
Adhere to innovation drive and enrich product matrix: The company adheres to innovation drive and continues to invest in the development and construction of technical platforms such as magnetic stimulation, electrical stimulation/electrophysiology, robotics, laser radio frequency, etc., to enrich product pipelines and technical reserves.
The original product was iteratively upgraded, and the 1H23 second-generation pelvic floor functional magnetic stimulator, second-generation transcranial magnetic stimulator, and second-generation group biofeedback were successfully launched. Emerging products have been launched one after another. The plastic magnetic products were certified by the FDA in March 23 and certified domestically in November; in February 23, they obtained Class II medical registration certificates for high-frequency electrocautery devices and Class III medical registration certificates for semiconductor lasers; clinical trials of picosecond laser therapy devices have been completed and are expected to be evidenced by the end of 24; the first-generation products of rehabilitation robots have all been proven, covering the full rehabilitation evaluation and training of the upper and lower limbs of the human body; Magneuro ONE series products were certified in February '24 and expanded to transcranial magnetic robots.
Optimizing the business structure, rehabilitation and aesthetic business development can be expected: According to the announcement, in the first three quarters of 23, pelvic floor rehabilitation (excluding obstetric health) business revenue increased nearly 30% year on year, mental rehabilitation and neurological rehabilitation business revenue increased by more than 50%/100% year on year. The share of pelvic rehabilitation business revenue has dropped to about 40%, and the business structure is gradually being optimized. In the field of rehabilitation specialty, with the improvement of the layout of core products and solutions, the scale and comprehensive competitiveness of the company's major rehabilitation business will increase significantly. In the medical and aesthetic field, the company has a comprehensive layout of shaped magnets, picosecond lasers, and radiofrequency (intimate, fat dissolving, anti-aging), and the launch of major products is expected to achieve a second growth curve.
Profit prediction, valuation and rating: As a leading magnetoelectric joint rehabilitation device, the company is a blue ocean circuit with high card position growth. It is driven by innovation and actively expands rehabilitation and medical and aesthetic business, and is expected to benefit from the boom in the rehabilitation industry and the upgrading of consumer consumption. Considering increased market development efforts, the net profit forecast for 23-25 was lowered to 1.36/1.81/230 million yuan (down 14%/9%/7% from the previous year). The current stock price corresponds to the 23-25 PE of 27/20/16 times. The valuation is low, and the “overstock” rating is maintained.
Risk warning: Rehabilitation department construction is slowing down; failure to develop new products or poor marketing; medical policy risks, etc.