Key points of investment
Overall, the results were in line with expectations. In 2023, the company achieved operating income of 2.120 billion yuan (+20.29%), net profit attributable to mother of 454 million yuan (+22.88%), and net profit of non-return to mother of 442 million yuan (+29.52%). Among them, Q4 achieved operating income of 652 million yuan (+27.58%), net profit to mother of 134 million yuan (+7.57%), and net profit after deducting non-return to mother of 121 million yuan (+3.43%) in a single quarter.
The company's performance is basically in line with expectations. The 2023Q4 revenue side returned to rapid growth, and we are optimistic about the 2024 full-year performance.
Ultrasound is developing steadily, and the prospects for new intravascular ultrasound products are promising. The company's caichao business achieved revenue of 1,223 billion yuan (+13.28%) in 2023. In 2023, the company's next-generation ultra-high-end ultrasound platform, the S80/P80 series, was officially launched on a small scale; equipped with the fifth-generation artificial intelligence (AI) prenatal ultrasound screening technology, Fengyan S-Presence 5.0, completed clinical verification; completed engineering research and development of high-end portable products, and is expected to be launched on the market in 2024. In addition, the company's major new coronary intravascular ultrasound product was approved domestically in December 2022, and was successfully selected for collection by the Zhejiang International Alliance in January of this year at a price higher than similar products in the industry. The market share of the product is expected to increase at an accelerated pace, contributing to the company's new increase in performance.
Soft lenses are growing rapidly, and minimally invasive surgery continues to expand: the company's endoscopy business achieved revenue of 850 million yuan (+39.02%) in 2023.
1) Soft lenses: In 2023, the company launched the HD-580 series of endoscopes. Their performance was further improved. Spectroscopic control and image quality all reached the leading level in domestic production, which can cover departments related to digestion, respiratory, and biliary and pancreatic surgery. The company currently ranks third in the domestic market in the field of digestive endoscopy, after Olympus and Fuji. It is in a leading position among domestic companies, and its market share is expected to continue to increase in the future. 2) Minimally invasive surgery: In 2023, the company launched the SV-M4K100 series 4K ultra-high definition multi-modal camera system and Jingwei II series full HD soft and hard mirror integrated camera system, laying a solid foundation for multi-modal comprehensive solutions; self-developed 10mm thoracic laparoscopy, pneumoabdominal machines and other products have been approved for sale and mass production and sales. In addition, the company has introduced a team with rich surgical marketing and operation experience, which is expected to further drive the development of the surgical business.
Gross margin increased significantly, and profitability increased. In 2023, the company's gross sales margin was 69.41%, up 2.54 pct year on year; net sales margin was 21.43%, up 0.45 pct year on year. The significant increase in gross margin is expected mainly due to the continuous optimization of the company's product structure and the increase in sales share of high-end products. In terms of the cost ratio for the period, the sales expense ratio in 2023 was 24.73%, up 0.72 pct year on year; the management expense ratio was 6.05%, up 0.49 pct year on year; the R&D expense ratio was 18.12%, down 0.54 pct year on year; and the financial cost ratio was -2.11%, down 0.41 pct year on year.
Investment advice: Taking into account factors such as the impact of industry policies, we slightly lowered the company's profit forecasts for 2024 and 2025, and introduced a new profit forecast for 2026. We expect the company's revenue for 2024-2026 to be 2,646/31.86/37.73 billion yuan, respectively, net profit to mother of 588/7.23/885 million yuan, corresponding EPS of 1.37/1.68/2.05 yuan, and corresponding PE of 28.38/23.07/18.86 respectively. The company's ultrasound development is steady and endoscopy is developing rapidly. Performance is expected to maintain good growth and maintain a “buy” rating.
Risk warning: Risk that product development progress falls short of expectations; market competition increases risk; risk of exchange rate changes.