Key points of investment
The company disclosed its 2023 annual report, with 2023 revenue of 329 million yuan, up 26.46% year on year; net profit attributable to mother was 5.69 million yuan, up 85.17% year on year (after adjustment); net profit not attributable to mother - 35.47 million yuan, which has not yet been profitable. Among them, revenue for the fourth quarter was 93 million yuan, up 36.1% year on year, and net profit to mother - 5.83 million yuan. Revenue continued its high growth trend. We believe that as electrophysiological harvesting continues to be supplied and new products continue to be released in 2024, high revenue growth can be expected.
Growth: High revenue growth can be expected in 2024
(1) The implementation of the collection in 2023 will accelerate the admission of the company's 3D electrophysiology products. In April 2023, electrophysiological collection and supply, and various provinces implemented collection policies one after another to drive the company's product release. The company basically won the bid for the entire line of single products collected, especially high-density measurement tubes. It was the only manufacturer that won the bid for a single item. Under the collection volume, 2023Q2-4's revenue increased 35.8%, 34.2%, and 36.1% year-on-year respectively, and revenue continued to grow at a high rate. On December 15, 2023, Beijing DRGs were executed in conjunction with electrophysiological bandwidth procurement. The company won the bid for various products such as pressure catheters and high-density measurement catheters, and the refrigeration series products have applied for additions; 2024Q1, Beijing-Tianjin-Hebei “3+N” alliance electrophysiological collection, and the company's 4 sets and individual components, including the frozen ablation series products, were all won. We believe that with the gradual implementation of collection and supply, the rapid release of the company's products is expected to continue.
(2) The number of three-dimensional surgeries exceeded 50,000, and the promotion of new pressure catheters and cryo-ablation catheters accelerated. In December 2022, the company's pressure sensing catheter was approved as the first domestically approved pressure catheter. Since clinical promotion in February 2023, product volume has accelerated markedly. According to the company's official data, by the end of August 2023, the company's pressure catheter completed 400 surgeries in China, completed 500 surgeries by mid-September, and completed more than 1,000 surgeries; in August 2023, the company's cryoablation series products were approved. As the first domestic cryoablation product approved for atrial fibrillation treatment, more than 20 have been completed The province is connected to the Internet, and the promotion of new products has accelerated markedly. By the end of 2023, the company's products had covered more than 1,000 hospitals, and the total number of 3D surgeries had exceeded 50,000. We believe that procurement has led to an increase in market penetration. As a domestic manufacturer with comprehensive bid products and continuous iteration of new products, we can expect high revenue growth in 2024 as the number of surgeries increases.
(2) Research and development of new products continues to advance. We believe that as the company's new products are launched one after another, it is expected to bring high long-term revenue growth. In August 2023, the company's freeze-ablation series products were approved; in November 2023, the company's fourth-generation Columbus? The 3D cardiac electrophysiological labeling system has been approved; the renal artery ablation project has entered the clinical trial stage; cooperation with Stereotaxis continues to be promoted. The fifth-generation “pan-vascular interventional robot magnetic navigation system” has been submitted for registration. The company is expected to obtain NMPA registration approval in 2024; complete Columbus? The development of a magnetic navigation module for a 3D cardiac electrophysiological measurement system has the conditions to support remote surgery. We believe that in the context of collection, continuous R&D innovation is the core driver of long-term revenue growth. The gradual improvement of the company's products is expected to drive the company's revenue to maintain a high level of growth over a long period of time.
(3) Continued expansion overseas is expected to build a second growth curve. In 2023, the company's overseas revenue increased by more than 50% year-on-year, covering 35 countries and regions. A total of 21 products obtained CE certification, 4 products obtained US FDA registration license, 1 product obtained UK UKCA certification, and 20 products obtained Brazilian registration certificate. We believe that with the improvement of the company's overseas products and channel expansion, revenue is expected to continue to grow at a high rate, creating a second growth curve.
Profitability: Gathering and supply led to a decrease in gross margin. Gross margin may increase in 2024 under cost reduction and efficiency (1) Gross margin may decrease under collection and supply in 2023, and cost reduction and efficiency increase in 2024 may lead to an increase in gross margin.
In 2023, the company's gross profit margin was 63.5%, down 5.6 pct from the previous year. The impact of procurement and supply decreased, but the company's cost reduction and efficiency effect was remarkable. According to the company's annual report, in addition to the new products converted to production in 2023, the average cost of catheter products decreased by 10.52%. We believe that gross margin may increase in 2024 as cost reduction and efficiency progress. (2) Due to the scale effect, the cost rate for the period is expected to decrease. In 2023, the company's sales expense ratio was 33.2% (+2.1pct), management expense ratio was 12.4% (-1.5pct), and R&D expense ratio was 27.7% (-1.8pct). Under the scale effect, the cost rate declined during the period. We believe that as revenue continues to grow in 2024, the cost rate is expected to continue to decline during the period under the scale effect.
Profit forecasting and valuation
Based on the above assumptions, we estimate that the company's revenue for 2024-2026 will be 4.63/6.27/825 million yuan, respectively, up 41%, 35%, and 32% year-on-year; net profit to mother will be 34.17/65.04/127.23 million yuan, respectively, corresponding EPS of 0.07, 0.14, and 0.27 yuan (24 times PS in 2024), maintaining the “gain” rating.
Risk warning: risk of product development and commercialization falling short of expectations; risk of industry policy changes; risk of increased competition in the industry; risk of fluctuating demand