1Q24 is passively pressured in the short term due to the high base performance growth rate, so I am optimistic about subsequent recovery
The company's 23-year operating income/net profit attributable to mother/net profit excluding non-return to mother was 79.72/23.96/18.36 billion yuan, +12.3%/+50.2%/+46.8% year-on-year. The company's 1Q24 operating income/net profit attributable to mother/net profit net profit excluding non-return to mother was 22.31/6.59/551 billion yuan, compared with -17.4%/-7.6%/-21.7% year-on-year. We believe that the pressure on the performance growth rate was mainly due to the high COVID-related revenue base for the same period last year. We expect 24-26 EPS2.08/2.47/2.93 yuan. Considering the rapid increase in revenue in major sectors such as respiratory oxygen production and blood sugar, and the continuous expansion of new products, we gave the company 24x PE for 24 years (comparable to the company's 24-year Wind with a consistent average expected average of 20x), corresponding to a target price of 49.85 yuan, maintaining a “buy” rating.
1Q24's sales expense ratio increased year-on-year, and gross margin decreased year-on-year, the company's 23-year sales/management/R&D/finance expense ratio was 13.78%/5.16%/6.33%/-1.98%, -0.75/-0.76/-0.66pct; 1Q24 sales/management/ R&D/ finance ratio 12.26%/4.38%/5.58%/-2.28%, year-on-year, +1.21/+0.36/+0.57/-2.24pct. The gross profit margin for '23/1Q24 was 51.49%/49.94%, +3.36/-2.77pct year over year. We think the main reason for the year-on-year decline in 1Q24 gross margin was mainly due to the relatively high revenue share of COVID-19 products with high gross margins in the same period last year.
Revenue from the respiratory and oxygen production and blood sugar sectors grew rapidly. The growth rate of infection control revenue was uneven in 23 years due to high base pressure: 1) Respiratory and oxygen production: revenue of 3.37 billion yuan, +50.6% year over year, of which ventilator revenue increased more than 30% year over year; nebulization product revenue grew more than 60% year over year; 2) Blood sugar: revenue of 760 million yuan, +37.1% year over year. We think COVID-19 products continued to be released in the same period last year; 3) Infection control: revenue of 760 million yuan, compared to -36.2% year on year. The year-on-year growth rate under high demand and a high revenue base was passively pressured.
Revenue from other products was differentiated in 23 years, with revenue from electronic blood pressure monitors growing rapidly. Other product performance differentiation: 1) Household category: revenue of 1.67 billion yuan, with revenue of electronic blood pressure monitor products exceeding 20% year over year; 2) First aid category: revenue of 160 million yuan, +8.0% year over year. The self-developed AED product M600 was certified, continued to expand at home and abroad, and revenue grew steadily; 3) Rehabilitation: Revenue of 1.23 billion yuan, -12.8% year over year. Although overall revenue declined year on year, major products in the sector such as wheelchairs, acupuncture, acupuncture, acupuncture, etc. The business growth trend is good.
Consumer healthcare leaders that continue to break through and maintain a “buy” rating
We expect the company's net profit for 24-26 to be 20.8/24.7/2.94 billion yuan, -13.1%/+18.8%/+18.6%. The current stock price corresponds to the 24-26 PE valuation of 18x/15x/13x. We adjusted the target price to 49.85 yuan (previous value 45.01 yuan) to maintain the “buy” rating.
Risk warning: supply difficulties in the industrial chain; rising raw material prices; slowing terminal demand.