The company's 1Q24 performance showed a marginal improvement trend and maintained a “buy” rating
The company achieved revenue/net profit of 79.8/1.26 billion yuan (yoy -24.8%/-42.9%) in 23 years. We estimate that domestic and external industry factors mainly affected the short-term pace of product admission and release, compounded the high revenue base for emergency testing products in 22 years. The company achieved revenue of 19.2/48 billion yuan (yoy -21.1%/-19.3%) in 1Q24, and the 1Q24 performance showed a positive month-on-month trend (revenue qoq +11.7%, net profit to mother corrected month-on-month). Considering external industry factors in the short term or continuing, we adjusted net profit to mother for 24-26 to $20.01/23.61 billion ($2,902/3.411 billion before 24/25).
As a platform-based enterprise, the company is optimistic about achieving positive development under innovative and international two-wheel drive. The company was given 17x PE for 24 years (comparable to the company Wind, a consistent expected average value of 16x), adjusted the target price to 18.09 yuan (previous value 22.15 yuan), and maintained a “purchase”.
Cost reduction and efficiency results have been shown one after another, but emphasis is still being placed on R&D. Cash flow levels have improved markedly, and the company's 1Q24 gross margin was 66.9% (yoy-0.1pct). We speculate that this is mainly due to regular fluctuations in the product sales structure. The company's sales/management/R&D expense rates for 1Q24 were 17.4%/7.4%/10.3% (yoy-0.7/-0.5/+0.8pct), respectively. The company gradually showed results in cost reduction and efficiency but still focused on R&D; the company's net cash flow from 1Q24 operating activities was 140 million yuan, which was corrected year on year, and the cash flow level improved markedly.
The structural heart disease business led the company's various business growth, and I am optimistic that the company will improve in 24 years1) Devices: Revenue of 36.7/890 million yuan (yoy -37.5%/-18.7%) in '23 (yoy -37.5%/-18.7%), mainly due to the high revenue base of emergency testing products in '22 and 1Q23; if the IVD business contribution is excluded, the device sector's revenue yoy +6.7% in '23. The company's structural heart disease business performed well, with revenue yoy +29.1%/+66.8% in '23/1Q24. Optimistic that sector revenue will resume steady growth in 24 years as industry demand recovers; 2) Pharmaceuticals: revenue of 30.4/790 million yuan (yoy -11.5%/-15.7%) in '23/1Q24, optimistic that sector revenue will resume steady growth in 24 years; 3) Medical services and health management: revenue of 1.26/240 billion yuan (yoy -2.4%/-40.3%), mainly due to the high revenue base of emergency business in '22 and 1Q23; considering the continuous expansion of the sector's business type, I'm optimistic that the sector will continue to expand in '24 Achieve positive development.
New product development is progressing steadily, and the product matrix continues to expand
1) Cardiovascular devices: Coronary shock wave balloons, degradable PFO blockers, etc. have been approved for marketing and have actively contributed to revenue growth. TAVR, biodegradable chamber deficiency blockers, etc. have submitted registration applications, coronary rapamycin drug injection systems, transcardiac mitral valve repair systems, electrophysiological PFA, and cryoablation systems; 2) Pharmaceuticals: Glycerin, insulin, etc. have been approved for marketing, and GLP-1 products with three targets of GLP-1/gCGR/GIP-FC have entered the second phase of clinical trials Moreover, progress is leading in China. Dulasopeptide biosimilar drugs are already in the third phase of clinical trials, ATO Eye drops are already in the first clinical phase; 3) Others: Non-invasive blood glucose meters have been submitted for registration, CGM is ready for registration, non-invasive continuous blood glucose meters are already in the clinical stage; research and development of new products related to ophthalmology (such as multifocal intraocular lenses), dermatology/medical aesthetics, dentistry, etc. is progressing in an orderly manner.
Risk warning: Product sales fall short of expectations, R&D progress falls short of expectations, reagent tenders reduce prices.