Minimally Invasive Healthcare (00853)'s revenue growth and loss narrowing in 2023 were lower than market expectations. CICC's judgment was mainly due to the restructuring of the domestic medical industry and problems with the global supply of some products.
The Zhitong Finance App learned that CICC released a research report stating that it maintained the “outperforming industry” rating of Minimally Invasive Healthcare (00853) and lowered the target price by 49.5% to HK$10.6. The company announced its 2023 performance forecast. Revenue increased by more than 15% year on year (excluding exchange rate effects, full text of the same caliber); net loss was no more than US$580 million (US$588 million in 2022); excluding one-time and/or non-cash provisions and losses, no more than US$436 million (US$503 million in 2022), a year-on-year loss reduction of more than 13%. Revenue growth and loss narrowing in 2023 were lower than market expectations. The bank determined that it was mainly due to the restructuring of the domestic medical industry and problems with the global supply of some products.
The report's main points are as follows:
Overall revenue growth was lower than the 1H23 performance guideline, and loss reduction has yet to be realized.
The company predicts a year-on-year increase of more than 15% in revenue in 2023, which is lower than the 25% guidance given by management in mid-2023. The company also predicted +32% YoY revenue for aorta and peripheral revenue, +22% for neurological intervention, +31-36% for heart valves, and +350% YoY for surgical robots. The main reason the bank determined that the revenue side fell short of expectations was that the restructuring of the domestic 2H23 medical industry affected the use of non-standard products such as coronary artery, neurological intervention, and heart valves, and the promotion of new products. At the same time, overseas supply chain issues may slow down heart rhythm management and orthopedic business growth. However, on the loss side, the company's full-caliber loss reduction in 2023 was limited. Excluding one-time and/or non-cash provisions and loss caliber loss reduction, the bank determined that the main reason was that cost reduction and efficiency measures would still take time to gradually implement. In terms of innovative pipelines, since the second half of 2023, vascular intervention robots, left atrial obstructors, MRI whole-body compatible pacemakers, etc. have been approved for marketing by the National Drug Administration; spinous balloons, TIPS coated stents, peripheral mechanical thrombectomy catheters, shock wave balloons, etc. have completed pre-marketing clinical enrollment; embolization microspheres, piezoelectric guides, and subkneecap medicine balls have begun pre-marketing clinical trials.
Waiting for the convertible debt problem to be resolved.
The company issued about US$700 million convertible bonds (old bonds) in June 2021, corresponding to the conversion price of about HK$92. During this period, the company carried out partial repurchases and announced partial borrowing and repayment of old in December 2023, issuing US$220 million of 5.75% convertible bonds (new bonds) due in 2028, and still has US$448 million of old bonds to be repaid. According to the agreement when the old bonds were issued in 2021, creditors can request early redemption from the company in June 2024, so the bank determines that the company must finalize the debt repayment plan within the next 2-3 months. The bank anticipates that the future implementation of convertible bonds may help ease market concerns about the pressure on the company's cash flow, or bring opportunities to recover market value.
Risk warning: The restructuring of the medical industry affects the development of surgery, the impact of procurement on prices exceeds expectations, the competitive pattern has deteriorated, internationalization falls short of expectations, and R&D has failed.