2023 results are in line with our expectations
The company announced 2023 results: revenue of 329 million yuan, +26.5% year-on-year; net profit to mother of 5.69 million yuan (3.07 million yuan in 2022). The results were in line with our expectations.
Development trends
The volume of three-dimensional surgery is rapid, and the dosage of core consumables for atrial fibrillation is expected to accelerate in 2024. In 2023, the company's domestic revenue was +18% year-on-year; the number of 3D surgeries was about 18,000, with a year-on-year growth rate of more than 50%. We estimate that the company's share of supraventricular surgeries will be around 11% in 2023. In 2023, high-density labeling+magnetic pressure ablation catheters successfully promoted medical insurance admission and admission to hospitals in various provinces and cities, and frozen ablation products were also approved for marketing in 3Q23. The company's guidelines are expected to maintain a year-on-year increase of about 50% in 3D surgery in 2024, and achieve 4,000 pressure catheter surgeries in the domestic market. Considering that the 27 provincial harvesting alliances led by Fujian will implement the selection results one after another starting in April 2023, we expect that the company's high factory price base factor will gradually be cleared in the 2-3 quarter of this year, and the company's revenue for the 2024 quarter is expected to continue to accelerate from month to month. The gross margin in 2023 was 63.5%, 5.6ppt year on year. The company said it was mainly affected by factors such as high initial cost of new product release and low gross profit due to international market pressure catheters. As the company promotes cost reduction and efficiency in the future, and the sales scale of new products such as high-density and pressure catheters expand, we expect gross margin to rise in the future.
Internationalization is accelerating, and we will keep an eye on the subsequent progress of the PFA and RDN pipelines. In 2023, the company's international business revenue was 69 million yuan, +59% year-on-year, and the share of revenue increased to 21% (17% in 2022). According to the company announcement, by the end of 2023, the company's products had covered 35 countries and regions around the world, 21 products had obtained EU CE certification, and 4 products had obtained US FDA approval. The company said it will strive to achieve 1,000 overseas pressure catheter surgeries and obtain CE certification for cryo-ablation products in 2024. In terms of the research pipeline: 1) The company's self-developed pressure pulse ablation catheter completed registration and clinical enrollment; 2) The follow-up of Shanghai Shangyang Medical's one-shot pulse ablation products invested by the company is nearing completion, and the company is expected to be approved at 1H25 (results will be disclosed); 3) The fifth-generation panvascular interventional robot magnetic navigation system in collaboration with Stereotaxis has submitted a registration application, and the company is expected to be approved within 2024; 4) The renal artery radiofrequency ablation system of the subsidiary Hongdian Medical will enter the China Drug Administration's innovative medical device in March 2024 The green approval channel is currently in the clinical trial stage.
Profit forecasting and valuation
We remain unchanged in our 2024/25 earnings forecast. We maintain our outperforming industry rating and target price of 31 yuan based on DCF (WACC 10.5%, sustainable growth rate 1.9%), with 29% upside compared to the current stock price.
risks
R&D failed, internationalization fell short of expectations, commercial promotion of new products fell short of expectations, and the competitive landscape deteriorated.