Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 7.980 billion yuan (-24.78%), net profit attributable to mother of 1,258 million yuan (-42.91%), deducted non-net profit of 1,123 million yuan (-47.58%), and operating cash flow of 990 million yuan (-64.51%). 2024Q4 achieved operating income of 1,721 billion yuan (-39.58%), net profit attributable to mother of 95 million yuan, after deducting non-net profit of 163 million yuan. 2024Q1 achieved operating income of 1,922 million yuan (-21.14%), net profit attributable to mother of 482 million yuan (-19.27%), deducted non-net profit of 456 million yuan (-18.85%), and operating cash flow of 142 million yuan (+205.45%).
The high base of emergency services affects apparent performance, and it is expected to be launched lightly starting in the second quarter. Affected by the high base due to sales of emergency rapid test kits and PCR instruments during the same period, the company's apparent performance for the full year of 2023 and 2024Q1 declined markedly. In addition, in 2023, the company proposed a total of 195 million yuan in impairment provisions for various assets, mainly including 33 million yuan in goodwill impairment provisions formed by the acquisition of Suzhou Bosmey and 115 million yuan in emergency product inventory impairment provisions.
Medical devices: Achieved operating revenue of 3.674 billion yuan (-37.50%) in 2023, accounting for 46.04% (-9.38pct). Revenue increased 6.70% year over year after excluding in vitro diagnosis business, including coronary implant intervention +2.9%/structural heart disease +29.08%/surgical anesthesia +9.37%/in vitro diagnosis -77.79%. The company's coronary implant interventional products have basically covered the entire PCI procedure, and in vitro diagnosis covers biochemical/immunology/molecular/blood and coagulation/POCT segments and important technical platforms. Various surgical anesthesia products have won bids in inter-provincial alliances, commercial sales channels have been developed at an accelerated pace, and the market share is expected to continue to rise steadily.
Pharmaceuticals: Achieved revenue of 3,044 billion yuan (-11.47%) in 2023, including 2,633 billion yuan (-11.90%) for formulations and 411 million yuan (-8.60%) for APIs. The company is deeply involved in the OTC market, driving the decline of sales channels such as counties. A number of generic drugs won the bid for the Guangdong Alliance in January 2024.
The GLP-1/gcGR/GIP-FC fusion protein MWN101 independently developed by the subsidiary Minwei Biology has carried out phase II clinical trials for type II diabetes and obesity. This product is the first GLP-1/GCGR/GIP-fc three-target GLP-1 product in China to enter clinical phase II.
Medical services and health management: Revenue of 1,262 billion yuan (-2.37%) was achieved in 2023. Excluding emergency related revenue, the revenue of Hefei Cardiovascular Hospital increased by 6.53% year on year. Among them, the revenue of Hefei Cardiovascular Hospital increased by 42.45% year on year, and the surgery category increased 33% year on year. The company provides cardiovascular disease medical services and health management through cardiovascular specialty hospitals, medical diagnostic laboratories, pharmaceutical e-commerce platforms, etc., while integrating AI products to help hospital informatization construction improve diagnosis and treatment efficiency, and achieve coverage of patients' home vital signs testing scenarios.
Research and development of key innovative products is progressing smoothly, and is expected to gradually contribute to increased performance in the future. The company's R&D expenses in 2023 were 889 million yuan (-8.11%), the R&D expense ratio was 11.02% (+2.00pct), the 2024Q1 R&D cost was 197 million yuan (-14.06%), and the R&D expenditure rate was 10.27% (+0.85pct). The R&D pipeline approval progress was in line with expectations, such as MemoSorb? Innovative devices such as biodegradable ovalvular hole unblocked devices, disposable coronary intravascular shock wave catheters/devices, and coronary mastoid balloon dilatation catheters have been successfully approved. The company has a rich research pipeline. In the future, many major independent innovative products will gradually be commercialized, which is expected to drive continued growth in performance.
The multi-consumer medical field is strategically laid out, and platform-based development strengthens management resilience. The company strategically lays out medical products in the self-funded market, actively expands sales channels for ophthalmic, dental and dermatological products, and promotes new product research and development, which may effectively avoid policy disturbances and ensure continued steady growth in performance. By 2023, the company's 6 dermatology products have reached the clinical stage, 5 ophthalmic products have been certified, 2 ophthalmic products have been registered, and 3 ophthalmic products have entered clinical trials. As the categories of consumer medical products continue to be enriched, the company's new development momentum will be further added.
Sales channel collaboration continues to be strengthened, and overseas market development is progressing in an orderly manner. Currently, the company's sales team covers more than 9,000 medical institutions at all levels in China (including more than 3,000 with PCI surgery capabilities), covering more than 360,000 retail pharmacies (the top 100 chains cover nearly 90%), and covering more than 160 countries overseas. 1) In-hospital: The three major pipeline products of coronary implantation, structural heart disease, cardiac rhythm management and electrophysiology can all be used by intracardiac interventional doctor teams in clinical practice, with remarkable synergy in marketing, sales channels and dealer management; 2) Out-of-hospital: An OTC team of more than 900 people has been formed to help promote strategic emerging sector products, and further set up county marketing and sales teams to explore sinking market opportunities; 3) Overseas: Currently, the company has obtained CE and FDA certification for multiple series of products such as vascular access, blockers, in vitro diagnosis, surgical anesthesia, and monitoring Broad overseas channels, It is expected to achieve rapid growth through flexible channel sales and diversified product portfolio strategies. Currently, the company's production capacity in Malaysia is under construction, laying a solid foundation for future business coverage in Southeast Asia.
Investment advice: The company is a domestic platform-based cardiovascular leader. Technological innovation drives continuous enrichment of production lines. Currently, it has basically escaped the influence of collection, and the strategic layout of the consumer medicine sector is expected to form a new growth pole. Based on emergency business to gradually eliminate disruptions on the company's operations and performance side, innovative product releases enhance the company's overall profitability. Considering changes in the industry business environment, demand needs to be further recovered, we lowered the company's net profit forecast for 2024-2026 to 19.20/22.28/2,583 billion yuan, up 52.63%, 15.92% year-on-year respectively, and EPS was 1.02/18/1.37 yuan respectively. The current stock price corresponds to 2024-2026 PE 14/12/10 Double, maintaining a “recommended” rating.
Risk warning: Risk of product commercialization falling short of expectations, risk of overseas expansion falling short of expectations, risk of R&D progress falling short of expectations.