Core views:
The company's performance was in line with expectations. According to the company's 23-year results announcement, the company achieved overall revenue of 1,094 million yuan (YOY +4%) and net profit to mother of 182 million yuan (YOY -11.1%) in '23. Among them, the hip replacement business achieved revenue of 590.4 million yuan (YOY -9.9%), the knee replacement business achieved revenue of 311 million yuan (YOY +16.9%), the spine and trauma implants business achieved revenue of 123 million yuan (YOY +105.4%), and the customized products business achieved revenue of 50 million yuan (YOY +5.6%). The slight increase in revenue was mainly due to the impact of national policies in '23, which led to a decrease in the number of in-hospital surgeries; the decline in net profit was mainly due to increased investment in R&D and market development.
The market share of the company's main business segments increased. According to the company's 23-year results announcement, in the joint business, the company achieved breakthroughs in traditional markets dominated by imported brands such as Zhejiang, Guangdong, Shanghai, and Beijing. For example, it gained more than 20% of the joint implant market share in Beijing in '23. In the spine business, the company actively promoted an increase in the market share of 3D printed spine products and admitted 262 new patients (52 provincial hospitals). In overseas business, the company relies on the “Belt and Road” to continue to break through the Southeast Asian market with Elken and JRI brands, and the market share growth rate has exceeded 50%.
The company's overall cost rate increased. According to the company's 23-year results announcement, the company's 23 R&D expenses ratio was 13% (YoY+2PP), management expenses rate 12% (YoY+1PP), sales expenses ratio 20% (YoY+3PP), and the overall cost rate increased.
Profit forecasting and investment advice. The estimated overall revenue for 24-26 will be 1,421 billion yuan, 1,864 billion yuan, and 2,464 billion yuan, respectively, and the corresponding EPS will be 0.22 yuan/share, 0.29 yuan/share, and 0.42 yuan/share. Taking into account the company's business growth and comparable company valuation situation, the company was given a 24-year PE 25X with a corresponding reasonable value of HK$5.89 per share, giving it a “buy” rating.
Risk warning: Joint procurement contract renewal prices fall short of expected risk, new product marketing falls short of expected risk, risk of failure to maintain distributor relationships.