Incidents:
The company released its 2023 annual report. In 2023, it achieved operating income of 1,300 million yuan, a year-on-year decrease of 2.69%; net profit to mother was 207 million yuan, up 11.92% year on year; net profit after deducting non-return to mother was 181 million yuan, up 8.56% year on year, and EPS was 0.40 yuan.
Vaccination products dragged down revenue, and overall operating efficiency improved, and the company's performance was in line with expectations. Operating revenue declined slightly in 2023, mainly affected by the decline in revenue from vaccination products. The company's operating efficiency improved significantly, with a gross profit margin of 34.89% (+1.28pct) and a net profit margin of 17.17% (+2.27pct), which are the highest levels in recent years; the sales expenses ratio is 6.02% (-0.69pct), the management expense ratio is 7.03% (-0.74pct), the R&D expense ratio is 3.93% (+0.87pct), and the financial expenses ratio is -0.14% (+0.03pct).
The hemodialysis business grew steadily, and collection and implementation accelerated industry concentration companies to achieve revenue of 949 million yuan in 2023 for blood purification products, an increase of 7.62% over the previous year, accounting for 73.02% of total revenue. The company's product direction, Sanxin Medical is the first domestic company to complete the hemodialysis equipment+consumables product chain. It has obtained registration certificates for hemodialysis filtration equipment, PP dialyzers, phthalate-free hemodialysis extracorporeal circulation pipelines, several dialysis powders/liquids, CRRT pipelines and accessories, and continues to iteratively upgrade existing products; industry policy direction, in March 2024, 23 provinces (districts, military corps) hemodialysis consumables were collected and landed. The company selected all categories of products collected this time and won the bid. While maintaining the amount of distributed purchases, they are also able to participate in the procurement to be distributed Volume distribution eligibility; in terms of capacity construction, the company has further established a production base in Sichuan and expanded its R&D and production base in Jiangxi, which is currently progressing smoothly; overseas dialysis business is growing rapidly. Some regions have benefited from significant growth in the company's overseas self-hosting strategy. The company focuses on developing markets in Southeast Asia, South America, Africa, etc., and the share of overseas revenue is expected to continue to increase. We believe that under the current trend of localization, the company has advantages in the layout of the entire industry chain, rich product categories, balanced volume and price in collection, guaranteed production capacity reserves, and rapid overseas market development, which can be used to further expand its market share and consolidate the dominant position of leading enterprises.
Extend the hemodialysis industry chain and build a full-cycle medical device industry layout for patients with nephropathy. The company's 2023 revenue for infusion products was 234 million yuan, down 33.51% year on year, accounting for 18.00% of total revenue. Excluding the impact of vaccination products, revenue from infusion products was 216 million yuan, down 1.17% year on year; revenue from cardiothoracic surgery products was 71 million yuan, up 7.78% year on year, accounting for 5.43% of total revenue. The company's infusion and cardiothoracic products focus on updating existing products and replacing new products domestically. Furthermore, the company entered the vascular intervention circuit in 2023 to lay out PTA high pressure balloons and indwelling needle products for dialysis. Among them, indwelling needles won the bid; the newly developed consumer product needleless syringe was the first to enter the needleless injection commercial circuit for patients with early-stage kidney disease such as diabetes. We believe that taking full nephropathy treatment as the strategic core, the company will continue to extend the industrial chain, which will help the company explore more potential incremental markets and enhance its overall competitiveness.
Investment advice and profit forecasting
The company's main hemodialysis business has maintained steady growth. It is estimated that in 2024-2026, the company will achieve operating income of 15.59 billion yuan, 17.61 billion yuan and 1.991 billion yuan respectively, and realized net profit of 2.39, 2.67, and 300 million yuan respectively. The corresponding EPS is 0.46, 0.51 and 0.58 yuan/share, respectively, and the corresponding PE is 17, 15 and 13 times, respectively, maintaining a “buy” rating.
Risk warning
R&D falls short of expectations, market competition intensifies, and industry policy risks.