Incidents:
The company released the 2023 annual report and the report for the first quarter of 2024, achieving operating income of 7.980 billion yuan (YoY -24.78%), net profit of 1,258 billion yuan (YoY -42.91%), net profit of 1,123 billion yuan (YoY -47.60%); 2023Q4 achieved operating income of 1,721 billion yuan (YoY -39.58%) and net profit of 95 million yuan (YoY -124.23%) in a single quarter (YoY -124.23%), net profit of 163 million yuan ( YoY -148.21%); 2024Q1 achieved revenue of 1,922 million yuan (YoY -21.14%) and net profit to mother of 482 million yuan (YoY -19.27%) in a single quarter, after deducting non-net profit of 456 million yuan (YoY -18.85%).
Comment:
1. Overall performance was under pressure in the short term. The company reduced its burden and reorganized, and its core business led a month-on-month recovery in performance.
The company's revenue and profit side declined year-on-year in 2023 and 2024Q1, mainly due to the high base of emergency product sales in the same period last year. At the end of 2023, the company assessed and reduced the asset burden and calculated an impairment of 195 million yuan, including 33 million yuan in goodwill impairment in the acquisition of Bosmi and 115 million yuan in emergency product inventory. After that, the company is expected to refocus on its main business and drive a return to growth in performance. Among the various sectors, medical device revenue in 2023 was 3.674 billion yuan (-37.5%), compared with +6.7% year over year after excluding in vitro diagnosis business, of which coronary artery performance was +2.9%, structural heart performance was outstanding, +29.08%, and surgery +9.37%; pharmaceutical sector revenue of 3,044 billion yuan (-11.47%), mainly affected by collection flow indicators; medical services revenue of 1,232 billion yuan (-2.37%), excluding emergency related revenue, +6.53% YoY. 2024Q1, coronary business +5.8% year over month, +22.17% month on month, structural core continued to grow high, +66.77% year over month, +45.45% month over month, its central vascular innovation product group contract ratio +12.63% and month-on-month +35.68% month-on-month, cardiovascular device business driven medical device sector +9.22% month-on-month, and overall business +11.70% month-on-month.
2. The research pipeline is progressing steadily, and the matrix of cardiovascular implant intervention products continues to be rich. In an environment where drug balloon collection has begun, the company continues to promote the innovative layout of cardiovascular devices. The R&D rate reached 11.02% (+2pct) in 2023, and remained above 10% in 2024Q1. At present, products such as the world's first degradable PFO blocker and sonic balloon have been launched one after another and have begun to contribute incrementally. In addition, major products such as TAVR, biodegradable room septum blockers, and radiofrequency puncture have been registered, and the company's long-term growth momentum is strong.
3. Collection+sinks in the OTC market, two-wheel drive drug release, and the development of innovative cardiovascular drugs accelerates.
In January 2024, various generic drugs such as Figrel and atorvata won the bid again, and insulin glargine was selected in the April national procurement; in addition, the company continued to promote the release of drugs on the OTC side, especially in the sinking market, and two-wheel drive performance rebounded. At the same time, the company's shareholders are biologically deploying innovative cardiovascular drugs. Among them, MWN101 is the first three-target GLP-1 drug to enter phase II clinical trials in China; self-developed drugs such as glycosylating peptides are also progressing clinically in an orderly manner.
Profit forecast: We expect the company's 2024-2026 revenue to be 91.56, 105.13, and 12.194 billion yuan respectively, with year-on-year growth rates of 14.74%, 14.82%, and 15.99% respectively, and net profit to mother of 20.89, 24.68, and 2,951 billion yuan, respectively. The year-on-year growth rates are 66.02%, 18.17%, and 19.56%, respectively, corresponding to the current stock price PE of 13, 11, and 9 times, respectively, maintaining the “recommended” rating.
Risk warning: risk of increasing or further price reduction of collected varieties, risk of price reduction or flow of drug collection, falling short of expectations in R&D and registration progress, risk of industry policy changes, market expansion falling short of expectations, etc.