Key points of investment:
Aortic dissection is at high risk, and the number of interventional procedures continues to increase: aortic diseases mainly include aortic dissection and aortic aneurysm. Aortic dissection is a fatal disease. Untreated acute dissection will have a case fatality rate of over 22.7% within 6 hours, over 50% within 24 hours, and over 68% within a week. Aortic aneurysms are mostly abdominal aortic aneurysms, accounting for about 75%. Abdominal aortic aneurysms cannot heal on their own without treatment. The prevalence rate ranges from 0.14% to 0.5% in the Asian population (2 to 7 million domestic patients). According to Frost & Sullivan data, the number of thoracic aortic interventions in China in 2021 was 32,500, and the number of abdominal aortic interventions was 16,700 (a total of 492,000 units). The estimated CAGR for thoracic aortic intervention and abdominal aortic intervention in 2021-2025 is 19.1% and 23.5%.
Leading aortic intervention company: The company is a leading domestic aortic intervention company. According to the company's 2023 semi-annual report, in 2021, the company's thoracic aortic intravenous stent products had a share of 32.4%, ranking first in the market, and 23.1% of abdominal aortic interventional stents, ranking second in the overall market. The company has a complete product line, and its products have set many domestic or global firsts, including the first domestically produced abdominal aortic stent and the first domestic intraoperative stent system approved for use in thoracic aortic dissection surgery. The Castor branched aortic laminating stent independently developed by the company expanded the indications for TEVAR surgery to aortic arch disease for the first time. It is the world's first branched aortic stent approved for marketing. The high growth of Castor and other products has driven the company's strong performance.
Peripheral products have entered the harvest period: the number of patients with peripheral diseases is huge, the treatment rate is low, and the market space is large. In addition to drug balloons, the domestic and foreign weekly interventional consumables markets are dominated by imports. The company has four products, including Reewarm PTX drug balloons, which have been approved, various products such as Vflower intravenous stents have been submitted for registration, and many products are under development. We believe that periphery, as a field with great potential for development in domestic vascular intervention, has complex product types, diverse treatment methods, and overlapping indications, making it difficult for companies to win in the long term by relying on a single product. Currently, there are many enterprises with a peripheral domestic layout. The company's advantage is the technical ability and sales ability that has been verified in the aortic field, and the product portfolio advantage has now been initially formed. We expect that with the gradual listing of the company's products in the next few years, the company is expected to challenge the monopoly position of foreign investors across the board.
First coverage, giving a “buy” rating: We expect the company's revenue for 2023-2025 to be 1,187 billion yuan, 1,517 billion yuan, and 1,898 million yuan, respectively, and net profit to mother of 492 million yuan, 654 million yuan, and 826 million yuan, respectively. We selected Huitai Healthcare, Bairen Healthcare, Aibo Healthcare, Opcom, and Chunli Medical in the A-share high-value consumables sector as comparable companies. We chose 2024 PE as a reference. Based on 28 times the PE of a comparable company, the company's reasonable market value is 18.2 billion yuan, which has room to increase by about 27% compared to the market value of 14.3 billion yuan on March 25, 2024. It was covered for the first time and given a “buy” rating.
Risk warning: increased market competition, exchange rate fluctuations, R&D risks