Xiangyu Medical is one of the leaders in the domestic rehabilitation equipment industry and has been deeply involved in the industry for more than 20 years. Established in 2002, Xiangyu Medical has been deeply involved in the rehabilitation equipment industry for more than 20 years, and has accumulated deep customer resources and process technology. In the technology-intensive rehabilitation medical device industry, through continuous technological innovation, the company has gradually achieved progress from “single device R&D and production - department solution - integrated overall solution for clinical rehabilitation throughout the hospital - regional health integration”, and has now become a leading domestic rehabilitation medical device enterprise.

“Policy support+strong demand+technological progress” jointly drive the growth of the rehabilitation industry and drive the expansion of rehabilitation devices. China's general rehabilitation medical device market was 57.9 billion yuan in 2022, and has maintained growth of nearly 20% in recent years. Looking forward to the future, there is still a lot of room for improvement in the allocation rate of rehabilitation departments and the share of rehabilitation beds in general hospitals. We estimate that in 2021-2026, the rehabilitation department construction of general hospitals is expected to bring the market size of 24.1 billion yuan of rehabilitation medical devices every year, and there is plenty of room for development. Judging from the competitive pattern, the domestic and foreign rehabilitation equipment market concentration is low. We estimate that the shares of leading domestic companies, Xiangyu Medical, Mayland, Chengyitong, and Pumen Technology in 2021 were 5.74%, 4.72%, 3.75%, 2.44%, and 1.98% respectively, totaling 18.62%. It is expected that there is still plenty of room for improvement.

Xiangyu Healthcare has significant competitive advantages and is expected to enjoy continuous development of industry dividends. 1) The product richness is leading in the industry, and it has the ability to provide various rehabilitation solutions. The company's products cover five categories of rehabilitation assessment, training, physical therapy, assistive devices and nursing, involving more than 500 products, and can provide multi-level rehabilitation solutions from “department - whole hospital - region”. 2) Industry standard setter, leading position in academia and industry. The company is significantly ahead of its peers in the formulation of national standards, the number of national special plans, and the number of products included in the national recommendation catalogue, laying the standard for the development of the industry. 3) It has supply and service capabilities for the entire rehabilitation industry chain, and has strong commercial sales capabilities. The company has a nationwide market channel network, academic promotion system, and after-sales service network. The “buy first, buy later” sales model reflects its strong voice in the supply chain.

4) Leading innovation, speeding up the deployment of cutting-edge technology, and enriching high-end product pipelines. The company continues to increase product development and layout in cutting-edge technology fields such as artificial intelligence and brain-computer interface, and the high-end product line is expected to continue to be enriched. 5) The strategy first creates a highland for the rehabilitation industry. Out-of-hospital and overseas markets are worth looking forward to.

The company is committed to building a full ecological health care industry chain and continuing to promote the integration of industry resources; the expansion of overseas and out-of-hospital sales channels is expected to further open up the growth ceiling.

Profit forecast and valuation: The company's 2023-2025 revenue is expected to be 7.4/9.5/1.18 billion yuan, a year-on-year growth rate of 52%/27%/25%, and net profit to mother of 23/30/370 million yuan, a year-on-year growth rate of 83%/30%/24%.

The company was given a 2024 PE 26-28x, with a price range of 48.69-52.43 yuan, and a corresponding market capitalization range of 78-8.4 billion yuan. There is 4-12% premium space compared to the current stock price. It was covered for the first time, and a “gain” rating was given.

Risk warning: Risk of declining industry sentiment; equipment procurement amounts and progress falling short of expectations; market competition exacerbates risks; policy risks.