2023 results are in line with our expectations
The company announced its 2023 and 1Q24 results: 2023 revenue of RMB 2.41 billion, up 21.8% year on year; net profit to mother of RMB 47.0% year on year. 1Q24 revenue was 620 million yuan, up 12.7% year on year; net profit to mother was 140 million yuan, up 41.4% year on year. The company's performance was in line with our expectations. The company is directing revenue growth of 20% in 2024.
Development trends
Digestive endoscopic diagnosis and treatment have maintained a high level of popularity, and attention is being paid to the progress of collection and implementation. The company's revenue for hemostasis and closure class/biopsy/dilatation/EMR and ESD/ERCP/EUS products in 2023 was 9.2 million/250 million/210 million/350 million/170 million/170 million/0.4 million yuan, +27.1%/-1.4%/+13.6%/+37.9%/+57.6%/+82.4%; we think 1Q24 revenue increased 8.7%/27%/17%/11%/23%, 1Q24 domestic digestive endoscopic surgery volume increased year-on-year, month-on-month It has remained high for the past few quarters. Revenue from 1Q24 hemostatic clips was 230 million yuan, and domestic revenue fell to 140 million yuan year-on-year, mainly due to dealer inventory adjustments before collection and landing. This round of collecting tourniquet products involves 8 provinces. We expect Hebei Province and Inner Mongolia to gradually launch them first. The company expects domestic revenue growth of around 10% in 2024.
Visualization products are expected to rebound, and innovative products contribute to revenue growth. The revenue of visualization products in 2023 was 97.44 million yuan (domestic accounting for about 75%), a year-on-year decrease of 49%; 1Q24 revenue was 6.32 million yuan. The company guidelines a visualization revenue target of 150-200 million yuan in 2024, which exceeds 100 million yuan in China, mainly driven by surgical cholecoscopy, respiratory scopes and ERAT products; overseas revenue of more than 50 million yuan, mainly driven by ECRP cholecoscopy. Furthermore, the company expects pancreatic cyst drainage stents to be approved in the middle of the year. Currently, the market is dominated by Poco AXIOS stents, etc., and we believe that revenue is expected to rise rapidly after listing.
Overseas business is growing at an accelerated pace. Overseas revenue in 2023 was 1.04 billion yuan, up 26% year on year. Among them, America/EMEA revenue increased 23%/31% year over year to 470 million/410 million yuan. The US market gradually expanded from ASC to the hospital side, and hospital sales revenue increased 35% year-on-year in 2023. The company aims to increase overseas revenue by more than 30% in 2024, and aims for an overseas market share of more than 10% over the next 3-5 years. We estimate that the global digestive endoscopy consumables market will be about 3.6 billion US dollars in 2023, the CAGR will be about 5-6% in the next 3 years, and the company's international market share will be about 5%. From this, we estimate that the company's target is 20-30% of overseas revenue for the next 3-5 years. Furthermore, we expect the increase in the share of overseas direct sales revenue to drive the company's profit margin. We expect that the company's gross margin and net profit margin will still have some room to improve.
Profit forecasting and valuation
Due to optimism that the share of overseas direct sales will drive gross margin, we raised the 2024 EPS forecast by 8.1% to 3.3 yuan, and introduced the 2025 EPS forecast of 4.1 yuan for the first time. Current stock prices correspond to 21.4x and 17.5x 2024/2025e P/E. Maintaining an outperforming industry rating, the target price of 106.16 yuan remained unchanged for the time being due to central sector valuation adjustments, corresponding to 32.0 and 26.2 times 2024/2025e P/E, with 49.7% upside compared to the current stock price.
risks
Industry policies affect prices, regional policies affect overseas business, and market competition worsens.