Key points of investment
Performance growth exceeded expectations. In 2023, the company achieved operating income of 509 million yuan (+37.09%), net profit attributable to mother of 217 million yuan (+49.86%), and net profit of non-return to mother of 212 million yuan (+48.35%). In 2024Q1, we achieved operating income of 112 million yuan (+23.35%), net profit attributable to mother of 53 million yuan (+54.22%), and net profit of non-return to mother of 48 million yuan (+41.44%).
The company's performance maintained high growth. During the reporting period, the company actively explored the global market, and sales of GI, ERCP, and ESD/EMR products increased rapidly.
Domestic and overseas markets are expanding at an accelerated pace. The company's domestic and overseas sales revenue in 2023 was 261 million yuan (+37.57%) and 245 million yuan (+36.78%), respectively. 1) In terms of the domestic market, it is mainly the growth of domestic endoscopic surgery and routine examinations. The number of domestic terminal hospitals covered by the company exceeded 2,300 in 2023, with a coverage rate of 44% for tertiary hospitals. 2) In terms of overseas markets, the main thing is that overseas business is developing smoothly. In 2023, the company actively developed new markets and new customers, adding 12 European customers, 12 Asia-Pacific customers, 10 North America and other regions, increasing the number of new overseas customers by 35%, and introducing 2 high-quality major customers.
We believe that with subsequent sales volume of the company's new replaceable tourniquets and the gradual resumption of the pace of admission of bipolar devices, the company's domestic and overseas business is expected to continue to grow at a high rate.
Gross margin increased significantly, and profitability increased. In 2023, the gross margin of the company's main business was 70.87%, up 2.75pct year on year; net margin was 42.70%, up 3.64pct year on year. Among them, GI and EMR/ESD gross margins reached 74.01% and 66.25% respectively, up 4.13pct and 4.01pct, respectively. The continued increase in gross margin of the main business is expected mainly due to the continuous optimization of the company's product structure and an increase in the sales share of GI products with high gross margins. In 2023, the company's sales expense ratio was 9.77%, up 0.53 pct year on year; the management expense ratio was 8.98%, up 0.28 pct year on year; R&D expenses rate was 8.11%, down 0.37 pct year on year. The increase in company-related expenses is mainly due to the continuous increase in personnel wages and management costs to increase market share and develop business.
Investment advice: The company's 2023 performance exceeded expectations. We raised the profit forecast for 2024 and 2025 as appropriate, and introduced a new profit forecast for 2026. We expect the company's revenue for 2024-2026 to be 674/8.87/1.151 billion yuan, respectively, net profit to mother of 2.79/30/473 million yuan, corresponding EPS of 4.82/6.30/8.17 yuan, respectively, and corresponding PE 15.23/11.65/8.99 times, respectively. Maintain a “buy” rating.
Risk warning: risk of collecting consumables; risk of exchange rate changes; increased risk of market competition.