Incidents:

The company released its annual results report for the year 23, achieving annual revenue of 414 million yuan (-4.5%), achieving net profit attributable to shareholders of listed companies of 191 million yuan (+3.0%), and achieving net profit of 168 million yuan (-2.7%) attributable to shareholders of listed companies after deducting non-recurring profit and loss. The overall performance of the company was in line with expectations.

Comment:

Business side: The dental sector's performance growth in 23 years was under pressure, meninges grew steadily, and the work of connecting new products to the Internet progressed smoothly. 1) Annual oral repair film achieved revenue of 200 million (-3.9%) and a gross profit margin of 90.6% (-0.8pct). Dental bone powder achieved revenue of 31 million (-22.2%), gross profit margin of 74.5% (-3.1 pct). The company's oral membrane brand was strong, and the overall performance declined only slightly, and bone powder declined significantly; 2) The annual meningeal membrane achieved revenue of 165 million (+5.9%), with a gross profit margin of 92.3% (+0.6pct). In the context of collection, the company's meningeal pipeline profitability has remained steady; 3) The company's sales products have been connected to the Internet in 31 provinces across the country, including active biological bone, hard brain (spine) membrane fillers and surgical tablets Sponges are already in more than 2/3 of the provinces Completed the Internet connection work; 4) During the reporting period, the company deeply cultivated the industrial layout and implemented precise marketing. In the second half of the year, the company optimized and adjusted, adding about 220 new dealers, which is expected to help subsequent company channel expansion and hospital entry progress.

Financial side: The results of reducing costs and increasing efficiency are obvious. Under pressure from the external environment, profitability has steadily increased. The full year achieved a gross profit margin of 89.9% (+1.18pct), a net profit margin of 46.2% (+3.4pct), a period expense ratio of 42.7% (+0.4pct), a steady rate for the period, and the increase in net profit margin mainly due to investment income and income contributions from changes in fair value. Among them, the sales/management/ R&D expenses ratio was 25.7%/6.5%/10.7%, respectively, -1.3/-0.3/+2.0pct year-on-year. We believe that during the reporting period, the company faced greater external pressure, and the company's profitability remained steady. Management efficiency improvement combined with emphasis on R&D, and the results of cost reduction and efficiency were obvious.

Product side: Active bone is officially commercialized. Calcium-silicon bioceramic bone repair materials are expected to be on the market in 25 years, and there is great potential for subsequent release. 1) The active bone network is working smoothly. The company's entry work progressed steadily in 24, and I am optimistic about the commercialization expectations of active bone in 24; 2) The field of oral restoration is the company's dominant field. Calcium-silicon bioceramic bone repair materials are expected to collaborate with oral repair membranes, and the first stage verification results are superior to competing products, and subsequent launches are expected to be rapidly released.

Profit forecast: The company is a leading company in the field of regenerative medicine. The fundamentals are steady. Considering that consumption recovery in the dental sector falls short of expectations and growth pressure, we slightly lowered the company's performance forecast. We expect the company's net profit to be 1.98/235/283 million yuan in 2024-2026, and EPS is 1.10/1.31/1.57 yuan, respectively. The current market value corresponds to PE 22 times, 18 times /15 times, respectively, maintaining the “increase in holdings” rating.

Risk warning: New product entry progress falls short of expectations, R&D progress falls short of expectations, policy risks.