Introduction to this report:

Due to the impact of procurement, full-year results declined slightly, in line with expectations. At present, the negative effects of collection have basically been clarified, and joint contract renewals may bring benefits, and maintain the holdings increase rating.

Key points of investment:

Maintain an increase in holdings rating. Maintain the 2023-2025 forecast EPS of 0.72/0.95/1.25 yuan, give the 2024 target PE34X with reference to the sector center, maintain the target price of 32.30 yuan, and maintain the holdings increase rating.

The performance was in line with expectations. The company released a quick performance report. According to preliminary accounting, it is expected to achieve revenue of 1,209 million yuan (+0.6% year over year, same below), net profit of 278 million yuan (-9.7%), net profit of 254 million yuan (-7.3%) in 2023; based on this calculation, 2023Q4 will achieve revenue of 416 million yuan (-5.7%), net profit of 97 million yuan (-0.8%), after deducting non-net profit of 92 million yuan (-0.2%), resulting in price cuts, channel compensation, base figure growth effects in joints and backbone The whole year under comprehensive influence There was a slight decline in performance, and the results were in line with expectations.

The negative effects of collection have basically been cleared up, and joint contract renewals may bring benefits. The impact of the first round of price cuts and base figures for joint procurement was fully cleared in 2023; the spine is expected to grow strongly in 2024 on the low base formed by channel correction after the 2023 national procurement; Yunmei National Procurement is expected to be implemented starting in 2024Q2, but the scale is still small and the impact is expected to be limited. The joint procurement contract renewal tender is expected to be completed around April 2024. Referring to recent high-consumption national procurement rules and joint procurement contract renewal announcement No. 1, it is expected that the company will win the bid during this contract renewal, which did not win the bid in the first round, and is expected to contribute to the increase starting with 2024Q2. As a leading domestic joint enterprise with good product quality and strong supply and service capabilities, the company's share is also expected to continue to increase. Continue to develop and innovate, and continuously create new growth points. The company continues to develop and innovate in the field of superior joints. Recently, new products such as 3D printing tumor knee joints, zirconium-niobium ball and hip joints have been approved one after another, and its competitiveness continues to strengthen. The business blueprint is also being actively expanded. The spine, transportation, and trauma product lines in the orthopedic field continue to be rich, and the strategic layout of dentistry, PRP, and robotics continues to advance, which is expected to create new growth points one after another.

Risk warning: Joint procurement renewal rules or results fall short of expectations, and the amount of surgery falls short of expectations