Key points of investment

Coronary stent collection was selected for renewal, and the coronary intervention business ushered in restoration. The domestic coronary intervention market is relatively mature, the domestic replacement rate for some products is relatively high, and there is sufficient competition in the industry. As the number of people with cardiovascular disease continues to increase and coronary interventional treatment methods continue to spread, the number of interventional coronary artery disease cases in China will continue to grow rapidly, and the coronary intervention consumables market still has huge potential for development. As the main representative enterprise of domestically produced coronary interventional devices, Sano Medical continues to increase investment in R&D and accelerate innovation and iteration of coronary intervention products. Affected by category rules, the company did not participate in the first national centralized coronary stent volume procurement in 2020, leading to a decline in coronary stent market share and short-term pressure on coronary performance. In the 2022 coronary stent collection renewal, the company's two latest drug-eluting stents, HT Supreme and HT Infinity, were selected from Group A and Group B at a price of 779 yuan and 839 yuan respectively, with the intended purchase volume of nearly 50,000 pieces in the first year. Affected by the national second-round coronary stent volume procurement policy, sales of coronary stent products resumed rapid growth in 2023, and revenue from coronary intervention increased 99% year-on-year in 2023, achieving a significant increase. In the future, as the company's new coronary intervention products continue to be approved, it is expected to drive steady growth in coronary intervention performance.

The layout of all neurological intervention products, and major products are about to be approved. According to Insight Consulting data, China's neurointerventional medical device market was 5.8 billion yuan in 2020, and is expected to increase to 17.5 billion yuan in 2026, with a compound annual growth rate of 20% from 2020 to 2026. Currently, foreign brands still occupy most of the market share in the domestic neurointervention market. The localization rate of some innovative single products is relatively low, and there is plenty of room for development. The company's neurological interventional products cover all categories such as acute ischemic products, stenosis ischemia products, hemorrhagic products and pathway products, and related products have been approved for marketing one after another. In 2023, the company's neurological intervention business revenue increased 61% year over year, achieving rapid growth. Looking at major research products, the world's first self-inflating drug stent independently developed by the company completed clinical enrollment in February 2023, and the product has completed the submission of innovative approval data; clinical trials of coated dense mesh stents independently developed by the company were completed nationwide in July 2023, and products under neurological intervention research are gradually entering the harvest period. The commercialization of new products is expected to contribute to the company's performance growth in the future.

Accelerate overseas market layout and open up room for growth. Accelerating overseas layout under the normalization of collection is expected to open up the company's growth ceiling. The company actively lays out overseas markets. Currently, its overseas business has covered mature markets such as Europe and America and emerging markets such as Southeast Asia and Africa. The company has obtained registration certificates for various coronary intervention products in more than 10 countries, including Europe, the United States, South Korea, and Singapore. The company is gradually cooperating with local dealers to strengthen channel layout and further accelerate product promotion and sales. According to the company's announcement, in the second half of 2023, the company's HT Supreme drug-eluting stent system successively obtained CE MDR certification from Turkey, Brazil, Bangladesh and the European Union, continuing to promote the company's product's overseas market access and laying the foundation for the company's overseas business revenue generation.

Investment advice: According to the company's 2023 performance report, we have fine-tuned profit forecasts. The company's net profit for 2023-2025 is expected to be -49/3/51 million yuan, respectively, with growth rates of 70%/105%/1910%, respectively. As a leading domestic coronary and neurological intervention company, the company was selected to recover its performance. Innovative neurological interventional products were launched one after another, leading to an increase in performance, while continuing to accelerate overseas market expansion and open up room for the company's growth. It is expected that the company's performance will resume rapid growth and maintain the “holds-A” proposal.

Risk warning: Product commercialization falls short of expectations, market competition increases risk, centralized procurement risk, overseas market operation risk or exchange rate risk.