Incidents:

The company released its 2023 annual report. In 2023, it achieved operating income of 1.65 billion yuan, a year-on-year increase of 35.71%, net profit to mother of 534 million yuan, an increase of 49.13% year-on-year, and net profit after deducting non-return to mother of 468 million yuan, an increase of 45.54% year-on-year. The fourth quarter achieved revenue of 437 million yuan in a single quarter, an increase of 32.80% over the previous year, net profit to mother of 131 million yuan, an increase of 34.11% over the previous year, and net profit after deducting non-return to mother of 108 million yuan, an increase of 21.78% over the previous year.

Comment:

Various business segments went hand in hand, and market expansion and product innovation helped improve future performance. In 2023, the company's electrophysiological products achieved revenue of 368 million yuan, an increase of 25.51% over the previous year. The main reason was the successful upgrade from two-dimensional surgery to three-dimensional surgery, as well as excellent performance in volume procurement projects, and a significant increase in market share. Coronary pathway products achieved revenue of 791 million yuan, an increase of 38.98% over the previous year. The main reason is that domestic vascular intervention products continue to increase their marketing efforts, deepen channel linkage, and achieve a further increase in product coverage and hospital penetration rate. In 2023, the company obtained registration certificates for coronary products such as guide extension catheters, guide wires, double lumen microcatheters, and hyperbaric balloon dilatation catheters.

Interventional products achieved revenue of 256 million yuan, an increase of 40.36% over the previous year. The main products were peripheral support catheters, carotid balloon dilation catheters, spring ring push guides, and perfusion catheters.

Increase R&D and reasonably control cost growth to help long-term development

In 2023, the company's sales expense ratio was 18.46%, down 1.36 pct; the management expense ratio was 4.98%, down 0.49 pct year on year; the R&D cost rate was 14.42%, up 0.04 pct year on year; mainly due to the company's continuous investment in R&D projects, especially in product development in the fields of electrophysiology and vascular interventional devices. In 2023, the company added 19 new invention patent applications and 5 authorizations; 21 new utility model patent applications were added, and 34 were authorized. The company has effectively controlled the growth of sales and management expenses by optimizing internal management processes and improving operational efficiency.

M&A investment and internal resource integration will focus on building a diversified competitiveness matrix. In 2023, the company acquired the remaining shares of Shanghai Hongtong Industrial to achieve wholly-owned holdings and promote resource integration and enhanced synergy effects. At the same time, by investing in Hunan Eweidi and Shenzhen Haoying Healthcare, we are expanding our product line and creating new growth points. In addition, the company is also actively promoting digital transformation to enhance production and operation efficiency.

Profit forecast: We expect the company's revenue for 2024-2026 to be 22.91/30.82/38.47 billion yuan respectively (2,290 billion yuan and 3,080 billion yuan before 2024/2025, respectively), and net profit to mother of 702/9.60/1,283 billion yuan (2024/2025, respectively). The main reason for the increase is continuous improvement of the cost structure, reasonable control of cost growth, and maintenance of the “buy” rating.

Risk warning: the risk of expanding the scope of centralized procurement, the risk of fluctuations in overseas markets, the risk of market competition increasing the risk, and the risk of brain loss in scientific research and management.