Maintain an increase in holdings rating. Considering the impact of 2023H2 external disturbances on the company's business development pace, the 2024-2025 EPS forecast was lowered to 0.23/0.33 yuan (originally 0.32/0.41 yuan), and the 2026 EPS forecast was added at 0.44 yuan. Maintain an increase in holdings rating.
Due to external disturbances, 2023H2 performance is under pressure, and it is expected to return to a growth trajectory in 2024. Affected by external disturbances, the company achieved revenue of 1,094 million yuan (+4.0% YoY) and net profit of 182 million yuan (YoY -11.1%) for the full year of 2023, of which 2023H2 achieved revenue of 445 million yuan (-14.5% YoY) and net profit to mother of 50 million yuan (-37.1% YoY). The gross margin for the whole year increased 1.17pp to 61.66% year over year, while net profit margin fell 2.82pp to 16.65% year over year, mainly due to increased investment related to R&D and market development. Despite disturbances in the external environment, we believe that the company's competitive advantage in orthopedic joints and other fields continues to strengthen, and it is predicted that 2024 results are expected to return to a growth trajectory. Considering the low base of 2023H2 and the positive impact of the renewal of the joint procurement contract is expected to be fully reflected in 2024H2, we predict that 2024 results may show a high trend of low and back.
It has accelerated its penetration into the high-end market, and has performed well overseas. By product line, under the competitive disadvantage brought about by the first round of low prices, combined with external disturbances, hip joint achieved revenue of 590 million yuan in 2023, down 9.9% year on year, while knee revenue still increased 16.9% year on year to 311 million yuan. The incremental contribution brought by new single-condyle knee products also reflects the further strengthening of the company's coverage and penetration in high-level hospitals. The rapid release of 3D printed spine products led to a 105% year-on-year increase in spine and trauma business line revenue to $123 million. Under external disturbances, the growth rate of customized products and services slowed, achieving revenue of 50 million yuan, a slight increase of 5.6% over the previous year. By region, overseas revenue of 227 million yuan was achieved in 2023, a sharp increase of 37.1% over the previous year. The Elken brand and JRI both achieved good growth. As overseas markets continue to develop, overseas business revenue is expected to continue its rapid growth trend.
Continue to invest in innovation to continuously strengthen competitiveness in the field of orthopedics. The company continues to invest in research and development, with R&D expenditure of 137 million yuan in 2023 (+23.7% year over year). Innovative products such as iBot hip surgery robots, second-generation 3D printed acetabular cups, and intervertebral fusion devices have been approved one after another. Digital orthopedics and 3D printing technology platforms continue to improve and mature, and the company's competitiveness in the orthopedic field is expected to continue to strengthen.
Risk warning: The increase in the number of surgeries fell short of expectations, and the renewal rules fell short of expectations