Incident: In 2023, the company achieved revenue of 1,284 million yuan (-37.63%, same period below), net profit to mother of 112 million yuan (-81.30%), and net profit of 108 million yuan (-81.68%) after deducting non-return to mother net profit. The results fell short of our expectations.
After harvesting, the company's sales expenses dropped significantly, and R&D expenses increased year-on-year. In 2023, the company's sales expenses were 561 million (-21.10%), R&D expenses were 130 million (+10.66%), sales expenses ratio 43.69%, and R&D expenses rate 10.14%. During the reporting period, based on the product layout of multiple brands and production lines, the company continued to optimize the product structure, consolidate segmented production lines such as sports medicine and bone repair materials, and explore the layout of fields such as neurosurgery, orthopedic rehabilitation, minimally invasive orthopedics, and digital orthopedics.
The entire sports medicine production line has obtained evidence to form an overall solution, providing a new growth point for the company's development; research and development of orthopedic materials such as novel bone cement, joint ceramics, reinforced PEEK, and tantalum metal have all made breakthroughs; surgical supplements and layout improvements in new fields such as orthopedic endoscopy, minimally invasive surgery equipment, 3D printing, neurosurgery, etc.; actively expanding PRP product indications in the field of tissue repair, with remarkable results in clinical application coverage.
Orthopedic procurement continues to achieve good results, and the domestic share is expected to increase. In September 2023, the company won the bid at an ideal price in the Beijing-Tianjin-Hebei Provincial Coalition for Traumatic Products. In November of the same year, the company won the bid for the entire national sports medicine product collection. The share of total demand increased significantly, and absorbable anchor products made breakthrough progress in this volume.
Profit forecast and investment rating: Considering the impact of channel inventory and industry surgery volume, we lowered the net profit due to mother in 2024-2025 from 732/847 million yuan to 269/351 million yuan. In 2026, it is estimated to be 415 million yuan, and PE corresponding to the current market value is 38/29/25X. Maintain a “buy” rating.
Risk warning: Risk of product release falling short of expectations, policy risk, increased risk of market competition, etc.