Core views

In 2023, the market coverage of the company's three core products, Castor, Minos, and peripheral medicine, continued to increase, and the number of admissions and terminal implants for innovative products Talos and Fontus increased rapidly. The company is a leading company in the domestic aortic and peripheral intervention field. Looking ahead to 2024, the domestic market Fontus, Talos and peripheral medicine is expected to maintain rapid growth, and Castor and Minos are expected to maintain steady growth; overseas market companies continue to increase their development efforts and market promotion of innovative products, and overseas business is expected to maintain high growth. In the short term, aortic harvesting has not yet been implemented on a large scale across the country. There is uncertainty about the impact on the company's performance. Considering the company's rich product portfolio and strong ability to withstand collection risks, it is expected that the decline in harvesting may be moderate. In the medium to long term, the company's innovative products will continue to expand in domestic and foreign markets, and the company's revenue and profit side is expected to maintain steady growth under the scale effect.

occurrences

The company released its 2023 annual report

According to the announcement, the company achieved revenue of 1,187 billion yuan in 2023, an increase of 32.43% over the previous year; achieved net profit of 492 million yuan, an increase of 37.98% over the previous year; and realized net profit of 462 million yuan without return to mother, an increase of 42.74% over the previous year. EPS is 6.81 yuan/share.

The company plans to distribute a cash dividend of RMB 30 (tax included) to all shareholders for every 10 shares and 4.9 bonus shares (tax included) for every 10 shares, calculated to distribute a total cash dividend of 248 million yuan and 40.53 million bonus shares. The total cash dividend accounts for 50.40% of the company's net profit due to mother in 23, and the total share capital increased to 123 million shares.

Brief review

Performance growth is in line with expectations, and overseas revenue continues to grow rapidly

The company's 2023 revenue, net profit to mother, and net profit after deduction were RMB 1,187, 4.92 and 462 million yuan respectively, up 32.43%, 37.98% and 42.74% year-on-year. The company's products were widely recognized by the market, competitiveness continued to increase, and production and sales increased steadily.

In Q4 of 2023, revenue, net profit to mother, and net profit without return to mother were 2.99, 1.04 billion yuan, and 97 million yuan, respectively. The year-on-year increase was 28.63%, 85.74%, and 100.91%, respectively. The profit side growth rate was much higher than the revenue side growth rate, mainly due to the lower profit side base for the same period last year.

By business, in 2023, aortic stents achieved revenue of 940 million yuan, an increase of 28.07% year on year, mainly due to the continuous release of the company's innovative products Castor and Minos; intraoperative stents achieved revenue of 132 million yuan, an increase of 54.59% year on year; the number of new Fontus admissions and terminal implants grew rapidly, leading to steady growth in sales performance; peripheral and other products achieved revenue of 115 million yuan, an increase of 49.30% year on year, mainly due to the continuous release of the innovative product Peripheral Medicine Ball.

By region, in 2023, the company achieved domestic revenue of 105 million yuan, up 30.94% year on year; achieved foreign revenue of 83 million yuan, an increase of 56.19% year on year, mainly due to the continued expansion of the company Minos, Castor and Hercules Low Profile in overseas markets.

Looking ahead to 2024, the domestic market Fontus, Talos, and peripheral medicine is expected to maintain rapid growth, and Castor and Minos are expected to maintain steady growth; overseas market companies continue to increase their development efforts and market promotion of innovative products, and overseas business is expected to maintain high growth.

The domestic market coverage of the company's products continued to increase, and the international market performance was outstanding. By the end of December 2023, the total number of terminal hospitals covered by the company's three core products, Castor, Minos, and Peripheral Medicine, in the domestic market exceeded 1,000, 800, and 900, respectively, and the market coverage rate continued to increase. In terms of international business, the company has now covered 31 countries and expanded its business to other countries and regions in Europe, Latin America and Asia Pacific. Among them, Castor, Minos and Hercules Low Profile straight tube laminating stents have covered 16, 19, and 21 countries respectively. In addition, peripheral medicine balls have been implanted for the first time in Brazil. The company is still in the stage of rapid expansion in overseas markets. As more products are approved overseas in the future and the number of countries covered is further increased, the company's share of overseas revenue is expected to increase further.

The company has a rich reserve of products under development, which lays the foundation for the company's long-term sustainable growth. The company has a rich product matrix under development, and has made significant progress in all R&D pipelines. By the end of 2023, an application for registration of Cratos branched aortic stents had been submitted, AegisII abdominal aortic stents were in pre-marketing clinical trials, and aortic flow limiting rupture stents were in the single-center clinical trial follow-up phase.

In the peripheral business area, on the venous side, the Vflower venous stent has been submitted for registration data, and the Vewatch venous venous filter and Fishhawk mechanical thrombectomy catheter have completed pre-marketing clinical implantation; on the arterial side, the new generation of peripheral bare balloon catheters and fibrous embolization springs are in the registration stage, and the lower knee bulb is in pre-marketing clinical trials. In terms of tumor intervention, microsphere products are in the clinical implantation stage before marketing. The HepaFlow TIPS laminating stent has been approved for a special review procedure for innovative medical devices, and is currently in the clinical follow-up phase. Furthermore, at the same time, the company explored the development path of customized medical devices for the first time at home and abroad, obtained the first customized thoracic aortic stent registration certificate and completed the first clinical trial, and sold the products in a customized manner overseas. We believe that the approval of the company's series of new products and a rich pipeline of ongoing research have provided a solid foundation for the company's sustainable growth in the future.

Gross margin increased slightly, and R&D investment continued to increase

The company's gross margin in 2023 was 76.45%, an increase of 1.27 percentage points over the previous year. It is expected mainly due to the continued scale effect of raw material procurement and continuous optimization of production processes. The sales expense ratio was 10.96%, down 0.64 percentage points from the previous year; the management expense ratio was 4.64%, down 0.49 percentage points from the previous year; the R&D expense ratio was 14.56%, down 0.78 percentage points from the previous year; the decline in various expense ratios was mainly due to the continuous increase in sales scale. The company's net operating cash flow in 2023 was 558 million yuan, up 67.07% year on year, mainly due to the increase in the company's business scale and sales revenue. The number of accounts receivable turnover days in 2023 was 41.25 days, up 1.66 days year on year, and the number of accounts payable turnover days was 53.13 days, down 0.99 days year on year. The overall operating efficiency of the company remained stable. The rest of the financial indicators are generally normal.

Leading in the domestic aortic intervention field, gradually gaining strength in the peripheral field

The company is a leading domestic company in the field of aortic and peripheral intervention. In the short term, aortic harvesting has not yet been implemented on a large scale across the country. There is uncertainty about the impact on the company's performance. Considering the company's rich product portfolio and strong ability to withstand collection risks, the decline in collection may be moderate; in the medium to long term, the company closely follows clinical market needs, continues to increase R&D investment, accelerate the improvement of the product line layout, and has a competitive product portfolio in aortic business, peripheral intervention and oncology intervention business, providing effective support for the growth of the company's business performance. We expect the company's revenue in 2024-2026 to be 1,519, 19.11, and 23.79 billion yuan, up 27.98%, 25.77% and 24.52% year on year, and net profit to mother will be 6.41, 8.17, and 1,029 billion yuan respectively, up 30.14%, 27.47%, and 26.02% year over year, corresponding to PE 23, 18 and 15 times, respectively, maintaining the “buy” rating.

Risk warning

1) The price reduction in concentrated volume procurement exceeds expectations: the company fails to keep up with the development of the industry in the future, continue to carry out technological innovation and product design, and maintain a leading position in the industry; or major changes in relevant national policies and market competition development, the company may face the risk of falling product market prices, which will adversely affect the company's future profitability.

2) Marketing falls short of expectations: The company's failure to improve its ability to manage dealers in a timely manner may damage the company's brand and reputation or decline in regional sales of products, which adversely affects the company's promotion.

3) Progress in the research pipeline falls short of expectations: Due to the large number of pre-registration procedures and long cycles for aortic and peripheral vascular interventional medical device products, the company may risk that newly developed products will not be registered in a timely manner, which in turn will delay the product launch and promotion process and adversely affect the company's business performance.