1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of 89 million yuan, +71% year-on-year; net profit of 4.17 million yuan to mother (loss of 9.33 million yuan in 1Q23). The revenue profit was in line with our expectations.
Development trends
The volume of three-dimensional surgeries continues to grow. We estimate that the number of 3D surgeries in the first quarter of the company exceeded 5,000, a year-on-year increase of more than double digits. The company's revenue in the first quarter was +71% year-on-year. In addition to the increase in the number of surgeries, there were also reasons such as the fact that electrophysiological collection was on the eve of implementation in the same period last year, and channel vendors were unwilling to buy goods. The company guidelines 2024 will increase the number of 3D surgeries by more than 50% year-on-year (we estimate that corresponds to more than 27,000 units), and achieve 4,000 pressure catheter surgeries in the domestic market. We anticipate that the company may have 1,000 cryoablation surgeries by 2024.
The high factory price base is expected to clear in the 2-3 quarter. Considering that the 27-provincial electrophysiological collection alliance led by Fujian began implementation 1 in April 2024 until it was basically implemented in 3Q23, we expect that the factors behind the high factory price base of the company's consumables will be cleared one after another in the 2-3 quarters of this year, and the revenue side may accelerate quarterly growth. Furthermore, the company's gross profit margin for 1Q24 was 60.5%, up 2.2 ppt from month to month. We expect gross margin to continue to rise in subsequent quarters as core atrial fibrillation consumables are released.
Looking forward to reading out the PFA clinical data. As of April 2024, the company's self-developed pressure pulse ablation (PFA) catheter has been registered for clinical enrollment; Shanghai Shangyang Medical's one-shot pulse ablation products are in the final stages of clinical follow-up. Considering that the US FDA has successively approved the marketing of Medtronic and Boston Scientific products since the end of 2023, PFA has become an important emerging technology that has received much attention in cardiac electrophysiology, and we look forward to reading clinical data from the two PFA products of microelectrophysiology. Considering that the company currently has the largest number of 3D measurement equipment among domestic companies, the company may continue to lead the “PFA+ 3D” technology upgrade in the future.
Profit forecasting and valuation
We remain unchanged in our 2024/25 earnings forecast. Maintaining an outperforming industry rating and a target price of 31 yuan based on the DCF model (WACC 10.5%, sustainable growth rate 2.0%), there is 25% room for an increase of 25% compared to the current stock price.
risks
The volume of new products fell short of expectations, research and development failed, internationalization fell short of expectations, and the competitive landscape deteriorated.