Net profit not attributable to mother in 2023 was slightly lower than our expectations
The company announced its 2023 results: revenue of 1.27 billion yuan, +15.5% year-on-year; net profit after deducting non-attributable net profit of 420 million yuan, -2.3% year-on-year. Revenue was in line with our expectations; net profit not attributable to mother was slightly lower than our expectations due to increased R&D investment and a decrease in net exchange earnings.
Development trends
All business lines are generally stable, and overseas revenue is growing faster than domestic revenue. Looking at the 2023 segment: 1) Structural heart disease business revenue of 500 million yuan, +26% year-on-year. Among them, revenue from left atrial occlusion devices was +32% year-on-year, and revenue from congenital obstructors was +23% year-on-year. 2) Peripheral vascular business revenue of 710 million yuan, +10% year-on-year. Among them, revenue from laminated stents was +11%, and revenue from venous venous filters was -1% year-on-year (impact of collection in some provinces). 3) Pacing electrophysiology business revenue was 60 million yuan, +10% year-on-year. By region, 1) mainland China's revenue was 990 million yuan, +11% year over year; 2) international revenue was 280 million yuan, +36% year over year, and the share of revenue increased to 22%. Among them, European revenue was +53% year over year.
The R&D pipeline is progressing smoothly, and we look forward to reaching important milestones. Since 2023, the company's innovative pipeline has made many advances: AcuMark atrial septal defect measurement balloons, peripheral thrombotic suction catheters, and the Epione puncture navigation and positioning system have been approved for marketing by the National Drug Administration; Aegisy venous filters, AcuMark measurement balloons, etc. have obtained EU CE MDR certification. Various products such as aortic arch chimney stents, aortic laminating stent breakage systems, peripheral medicine balls, intracranial thrombotic suction catheters, and distal channel catheters are in the registration and approval stage; thoracoabdominal aortic stents and aortic arch window stents are in the pre-marketing clinical follow-up stage; CS aortic arch branch reconstruction systems and transcatheter mitral valve clips have completed the first clinical study implanted into humans in China. IBS iron-based absorbable coronary drug stents in China are each in the follow-up phase II/III clinical phase, and an application for CE registration has been submitted. In addition, Yuanxin Technology, a subsidiary focusing on the iron-based absorbable materials platform business, completed Series B strategic financing of more than 200 million yuan in 2H23. We expect the company's innovative products in the fields of peripheral blood vessels and structural heart disease to be approved for sale one after another starting this year, contributing to new incremental results.
Profit forecasting and valuation
Considering the impact of the company's continued increase in R&D investment and the collection of some products, we lowered our 2024 net profit forecast of 20% to 487 million yuan, and introduced the 2025 net profit forecast of 585 million yuan for the first time. The current stock price corresponds to 14/11 times the 2024/25 deducted non-price-earnings ratio. We maintained our outperforming industry rating and lowered our target price by 18% to HK$2.64, corresponding to the 2024/25 deducted non-price-earnings ratio of 21/17 times. There is 50% room for an increase of 50% compared to the current stock price.
risks
The impact of procurement on prices exceeded expectations, R&D failed, internationalization fell short of expectations, and the competitive landscape deteriorated.