occurrences
The company released its 2023 annual report. The company achieved total revenue of 1,300 million yuan, a year-on-year decrease of 2.69%, and net profit to mother of 207 million yuan, an increase of 11.92% over the previous year.
Among them, blood purification products achieved revenue of 9493.4414 million yuan in 2023, an increase of 7.62% over the same period last year. The revenue of such products accounted for 73.02% of the company's total revenue.
Infusion category: In 2023, infusion products achieved operating income of 233.9562 million yuan, a decrease of 33.51% over the same period last year. The revenue of such products accounted for 18% of the company's total revenue.
Excluding the impact of vaccination products, infusion products (excluding vaccine syringes) achieved revenue of 216.4797 million yuan, a decrease of 1.17% over the same period last year.
Cardiothoracic surgery: In 2023, cardiothoracic surgery products achieved revenue of 75.5855 million yuan, an increase of 7.78% over the same period last year. The revenue of such products accounted for 5.43% of the company's total revenue.
Other categories: In 2023, other businesses achieved revenue of 46.1779 million yuan. The revenue of this type of business accounted for 3.55% of the company's total revenue.
Comment:
The blood purification business line is growing steadily, the product layout is diversified, and collection and implementation have promoted a continuous increase in industry concentration
In 2023, the company's blood purification products achieved revenue of 949 million yuan, an increase of 7.62% over the same period last year. Among them, the company's hemodialysis business achieved revenue of 416 million yuan in the first half of 2023, a year-on-year growth rate of 2.89%, and showed an accelerated growth trend in the second half of 2023. Hemodialysis is currently the most widely used blood purification treatment. As a renal replacement treatment necessary to maintain the survival of patients, it is suitable for the vast majority of patients with acute and chronic renal failure, and the requirements are quite rigid.
The number of patients with chronic kidney disease and end-stage kidney disease in China continues to grow. According to Frost & Sullivan analysis data, the number of patients with end-stage kidney disease in China increased from 2.5 million to 3.91 million from 2017 to 2022, with a compound growth rate of 9.12%. It is expected to grow from 4.24 million to 6.89 million in 2023-2030, with a compound growth rate of 7.17%. According to statistics from the National Nephrology Medical Quality Control Center, the number of people undergoing hemodialysis in China in 2022 was 844,000, and China's existing dialysis treatment needs are still far from being met. Furthermore, by the end of 2022, the average dialysis age of hemodialysis patients reached 53.8 months, an increase of 22 months compared to 2011; the proportion of patients who had been on dialysis for more than 5 years was 33.7%, and the proportion of patients over 10 years was 9.8%.
The dialysis treatment rate for patients with end-stage nephropathy in China will continue to increase, and the number of people on dialysis will continue to grow. At the same time, along with the extension of the age of dialysis, the hemodialysis industry has broad room for growth.
The company has a specific and complete industrial layout in the field of hemodialysis. Its products include dialysis powders, dialysis tubes, dialysis machines, as well as vascular intervention product lines such as PTA hyperbaric balloons and vascular sheaths for internal fistula protection in advanced dialysis patients (colon dialysis machines). In terms of dialysis equipment, the company's subsidiary Chengdu Weilisheng's hemodialysis machines, dialysis filters, and hemodialysis water production systems were selected in the “8th Batch of Excellent Domestic Medical Equipment Product Catalogue” commissioned by the National Health and Health Commission and selected by experts organized by the China Medical Equipment Association in 2022. In terms of dialysis consumables, we have firmly grasped the core technology and key processes of products such as dialyzers, dialysis membranes, dialysis solutions, dialysis tubes, etc.; we have quickly completed the production capacity layout of multiple manufacturing bases in Jiangxi, Yunnan, Heilongjiang, and Sichuan.
In recent years, leading companies in the field of blood purification have continued to increase their layout in the blood purification industry chain, and the trend of the entire industry chain is obvious. At the same time, 23 provincial (district, military) inter-provincial alliances for hemodialysis medical consumables have launched volume procurement, and a large proportion of leading enterprises with strong supply capacity have been selected. With the implementation of the collection policy, leading enterprises will further strengthen their market competitiveness, supported by the advantages of the entire industry chain and economies of scale. Some small-scale and single-variety enterprises are at a competitive disadvantage and will be eliminated, and the overall concentration of the blood purification industry is expected to gradually increase. Moreover, there is still plenty of room for domestic replacement of hemodialysis equipment and dialyzers. In 2021, domestic production of dialysis machines and dialyzers accounted for 19.2% and 44.7% respectively. Leading domestic companies already have the foundation to replace imports in related technical fields. The collection and implementation of the Hemodialysis Consumables Alliance is expected to accelerate the domestic replacement process.
The company has initially formed a full-cycle medical device industry layout for patients with nephropathy “diabetes - early and middle stage nephropathy (blood purification, vascular intervention)”. The company is based on the medical device field, and relies on deep technical accumulation and channel advantages formed in the field of blood purification treatment for end-stage nephropathy (uremia), with nephropathy treatment as the core, continuing to extend the industrial chain and gradually forming a full-cycle medical device layout for patients with kidney disease “diabetes - early and middle stage nephropathy - terminal nephropathy”.
Diabetes: The company obtained a medical needleless syringe registration certificate in July 2023. It is mainly used for diabetics to inject insulin, and is currently mainly sold on e-commerce platforms. According to data from the 2023 Academic Annual Meeting of the Nephrologist Branch of the Chinese Medical Doctors Association, diabetic nephropathy accounted for 21.1% of all dialysis patients in 2022, ranking second; among the dialysis causes of new dialysis patients in 2022, diabetic nephropathy surpassed the proportion of primary glomerulonephritis by 29.9% for the first time, becoming the main cause of hemodialysis. Diabetes treatment is an important direction for preventing end-stage nephropathy.
Early and middle stage nephropathy: The subsidiary Shengdankang uses traditional Chinese medicine as an entry point for early intervention in the management of chronic kidney disease. It aims to protect residual kidney function in patients with renal insufficiency and benefit a huge number of patients with early and middle stage chronic kidney disease. Jiangxi Shengdankang obtained a disposable sterile rectal catheter registration certificate and an intestinal hydrotherapy machine registration certificate in June 2023 and February 2024 respectively. The two can be used together to achieve high-grade colon cleansing.
Vascular intervention: Internal fistula is an important blood flow channel in hemodialysis treatment. It is the foundation that patients with end-stage kidney disease need to rely on to maintain long-term dialysis, and is known as the “lifeline” of dialysis patients.
Internal dialysis fistula can easily cause stenosis and blood clots due to repeated puncture during long-term dialysis, which affects dialysis treatment. In severe cases, internal fistula function is lost, and hospitalization is required. The company has advanced vascular pathway research and vascular intervention product development for internal fistula protection. It has obtained multiple registration certificates such as disposable dialysis indwelling needles, PTA high pressure balloon dilation catheters, and vascular sheaths. Among them, disposable dialysis indwelling needles are the first domestic registration certificate, filling gaps in the country.
Since the launch of the company's disposable dialysis indwelling needles, they have attracted great attention from hemodialysis patients due to their initial domestic product, and the rate of admission has continued to accelerate. The product has been selected as a product purchased in volume by 23 provincial (district, military) interprovincial hemodialysis medical consumables alliance, and sales are expected to increase in volume. Currently, the company is developing more than 10 vascular interventional products. As registration certificates are obtained one after another, the company will further establish an intervention/implantation product group for the treatment of internal fistula stenosis, blockage and lesion.
Investment advice
We have increased our forecast for the company's 2026 performance. The company's revenue for 2024-2026 is 1,501 billion yuan, 1,712 billion yuan and 2,017 billion yuan respectively, with revenue growth rates of 15.5%, 14.0% and 17.8% respectively. Net profit to the mother in 2024-2026 will reach 237 million yuan, 280 million yuan and 329 million yuan respectively, with growth rates of 14.9%, 18.0% and 17.3%, respectively. The corresponding PE for 2024-2026 is 15x, 13x and 11x respectively. Considering that the hemodialysis industry, especially dialysis machines and dialyzers, still has large import substitution space, and the company's expansion into fields such as diabetes and vascular intervention, the company's new business will open up the company's profitability ceiling and maintain a “buy” rating.
Risk warning
The company's hemodialysis equipment sales fell short of expectations.
There is a risk that the price of the product will drop drastically as a result of harvesting.