1Q24 net profit growth rate is impressive, and profitability continues to improve
The company's 23-year operating income/net profit attributable to mother/net profit excluding non-attributable net profit was RMB 24.11/4.86/463 million yuan, +21.8%/+47.0%/+54.7% year-on-year, in line with the rapid performance report. The company's 1Q24 operating income/net profit attributable to mothers/net profit excluding non-return to mother was 6.20/1.43/141 million yuan, +12.7%/+41.4%/+42.2% year-on-year. We believe that the high profit growth rate is mainly due to the impact of a relatively low base, as well as the gradual reflection of the company's cost reduction and efficiency gains, and continuous improvement in profitability. We expect EPS of $3.29/4.25/5.50 for 24-26 years. Considering the continuous improvement of the company's profitability under cost reduction and efficiency, we gave the company a 24-year PE valuation of 29x (comparable to the company's 24-year average expectation of 28x), with a target price of 95.36 yuan, maintaining a “buy” rating.
The overall cost ratio of the 1Q24 company decreased slightly year-on-year, and the gross margin increased the company's 23-year sales/management/R&D/finance expense ratio 23.74%/13.63%/6.25%/-3.23%, +1.86/-1.98/-2.10/-0.16pct; 1Q24 sales/management/ R&D/ finance ratio 21.68%/13.30%/4.99%/-0.48%, +1.47/ -0.29pct. In '23/1Q24, the gross profit margin was 64.50%/68.31%, +3.55/+5.44pct year on year. The results of the company's efficiency improvement and cost reduction were reflected, which led to a significant year-on-year increase in gross margin.
Domestic revenue grew steadily year on year in '23, and overseas revenue grew rapidly 1) Domestic: Revenue in '23 was 1.35 billion yuan, +18.2% year-on-year. Domestic surgery volume continued to recover in 23 years, driving the company's domestic revenue growth rate back to steady growth; 2) Overseas: Revenue in '23 was 1.04 billion yuan, +25.8% year over year, and overseas revenue grew rapidly year on year. Among them, the revenue of the US subsidiary in '23 was 471 million yuan (+22.6% year over year), and revenue in the Asia-Pacific region (excluding domestic) was about 160 million yuan (+23.1% year over year).
The year-on-year growth rate of revenue from multiple types of businesses was impressive. The revenue growth rate of some products was affected by external policies. The company's revenue in 23 was 9.21/2.47/2.12/1.73/3.51/0.43/0.174/0.12 billion yuan, respectively, +27%/-14%/+58%/+38%/+58%/+38%/+82%/-49%/+38%/+82%/-49%/+38%/+82%/-49% /+41%/+108%. We believe that revenue from some products declined year on year or was affected by external policies due to domestic sales.
Leading domestic endoscopic diagnostic and treatment consumables, maintaining a “buy” rating
We expect the company's net profit to be 6.2/8.0/1.03 billion yuan in 24-26, up 27.1%/29.4%/29.2% year-on-year. The current stock price corresponds to the 24-26 PE valuation of 21x/16x/13x. We adjusted the target price to 95.36 yuan (previous value of 101.35 yuan) to maintain the “buy” rating.
Risk warning: The amount of collected products is less than expected; terminal demand is slowing down; new product release falls short of expectations.