Kefu Healthcare is a leading enterprise in the field of household medical devices. Revenue grew from 851 million yuan in 2017 to 2,977 billion yuan in 2022, with a compound annual growth rate of 28.46%. We believe that with the iterative upgrading of products, continuous improvement in self-production rates, sales strategies focusing on core categories, and superimposed expansion of the hearing care service business, the company's business growth will be prominent, and the future can be expected.
1. Focus on core categories, attack the “independent brand+agent” product portfolio, and drive growth with the five major business lines
From an industry perspective, after the COVID-19 pandemic, awareness of personal health care increased, and demand for smart and convenient household devices continued to rise. Combined with the aging of the population and the increase in the prevalence of chronic diseases, the household medical device market growth trend is obvious. The Huajing Industry Research Institute predicts that China's medical equipment market is expected to reach 350 billion yuan in 2025. As a leading domestic household medical device brand, the company has nearly 10,000 models and specifications of products. In recent years, the company has optimized management and divided the products into five major production lines of health monitoring, rehabilitation aids, respiratory support, medical care, and traditional Chinese medicine physiotherapy, focusing on developing large products such as blood pressure monitors, blood sugar meters, thermometers, nebulizers, ventilators, wheelchairs, and nursing beds, and operating efficiency is constantly improving.
The company uses a “agent+own brand” model, with its own “Corfu” brand products as the core, and complements well-known international/domestic brands. Combining attacks, the brand influence continues to increase, creating the company's reputation in the field of household medical devices.
2. Under the dual approach of “online” + “offline” channels, the self-production rate continues to increase, and profitability channels are enhanced. In terms of channels, the company has now built a three-dimensional marketing channel integrating large-scale e-commerce platforms, large pharmacy chains, self-operated stores, etc., integrating online and offline to achieve channel flow, forming a new business form of diversity, multi-content, multi-dimensional and multi-touch points. Both online and offline have maintained rapid growth in recent years (the compound annual growth rate of online and offline reached 22% between 2018-2022). In order to maximize the efficiency of capital use, the company prioritized some core products for self-production. In 2023, the company's independent productivity was about 55%. As the self-production rate increased, the gross margin increased to 45% in the first three quarters of 2023, and products with high gross margin, such as blood pressure monitors and thermometers, all had a self-production rate of more than 60% by 2020. We believe that as the company's Yuhua production base in Changsha and the production base in Xiangyin are gradually built and put into operation, the self-production rate is expected to continue to increase, driving its gross margin to further increase.
3. Expand hearing care services, expand hearing loss stores, and create a second growth curve The number of hearing aid users is mainly people with disabling hearing impairment. As the degree of aging deepens, the number of hearing-impaired patients has further expanded, but due to reasons such as misunderstanding of hearing aids, the current penetration rate of wearing hearing aids is low, and the market can tap great potential. According to data from the China Industry Research Network, the global hearing aid market is expected to reach 8.33 billion US dollars in 2025, and China is expected to reach 8.07 billion yuan. Unlike other standardized household medical devices, professional testing and after-sales service for hearing aids is more important. Domestic hearing aid testing and fitting stores have a low degree of chain, and service quality is uneven. The company established the Jianer Hearing Aid Testing Center in 2018. It is one of the few domestic enterprises that also have hearing aid testing tools, hearing aid chain testing centers, and inspector training qualifications. Through refined operation management and professional inspection services, Jianer has established a good brand image among customers, and has rapidly accumulated a certain number of high-quality customers. The sales revenue of Jianer stores has grown rapidly. Revenue from The 6.711,400 yuan in 2018 increased to 120 million yuan (yoy +74.75%) in 2022. In the future, as the number of stores gradually increases and individual stores gradually climb into a mature period, the revenue of the Jianye Hearing business is expected to maintain a rapid growth trend, adding new impetus to the company's growth.
Profit forecast and investment suggestions: We expect the company's revenue for 2023-2025 to be $2,869 billion, $3.402 billion, and $4.412 billion, respectively, with year-on-year growth rates of -3.6%, 18.6%, and 29.7%, respectively. The net profit to the mother in 2023-2025 will be 274 million yuan, 343 million yuan, and 458 million yuan, respectively, up -9.2%, 25.2%, and 33.6% year-on-year respectively. Corresponding to the current stock price PE is 28 times, 22 times, and 17 times, respectively, covered for the first time to give “buy” ” Investment ratings.
Risk warning: Management risk due to rich product categories; risk of continuous cooperation with agent brand product suppliers; supply risk due to insufficient increase in self-production rate; risk of mergers and acquisitions falling short of expectations and loss of goodwill.