Incident: The company announced its 2023 annual report. In 2023, it achieved revenue of 414 million yuan, a year-on-year decrease of 4.52%; realized net profit of 191 million yuan, an increase of 2.98% over the previous year. The company announced its 2024 quarterly report. 2024Q1 achieved revenue of 90 million yuan, a year-on-year decrease of 17.83%; realized net profit to mother of 40 million yuan, a year-on-year decrease of 24.38%.

The expense ratio is stable, and the net interest rate has increased a lot. The company's management expenses rate in 2023 was 6.5%, a year-on-year decrease of 0.3 pct; the sales expense ratio was 25.7%, a year-on-year decrease of 1.3 pct; the R&D expenses rate was 10.6%, an increase of 2.0pct year-on-year, and financial expenses were -0.1%, an increase of 0.1 pct year on year. The company's gross margin in 2023 was 89.9%, up 1.2pct year-on-year. The company's net interest rate in 2023 was 46.2%, up 3.4pct year-on-year.

Various product lines are stable, and procurement has won bids one after another. By product line, oral repair membranes achieved revenue of 199 million yuan in 2023, down 3.87% year on year; absorbable hard brain (spine) membrane patches achieved revenue of 165 million yuan, an increase of 5.87% year on year; and bone repair materials achieved revenue of 30.71 million yuan, a year-on-year decrease of 22.2%. In 2023, the company successively participated in centralized volume procurement of absorbable brain (spine) membrane patches from the inter-provincial alliance led by Liaoning Province and the inter-provincial alliance led by Shaanxi Province, and the company was selected. This is the first time that the company's products have participated in inter-provincial alliance procurement. While developing an incremental regional market, the company can absorb hard brain (spine) membrane patches in successive purchases in Jiangsu Province in June 2023 and successive purchases in Hebei Province and Shandong Province in January 2024.

Pursuing innovation, the project has made remarkable progress. In 2023, the company successively obtained “Medical Device Registration Certificates” for phosphated acid corrosion agents and dental fissure sealants, further enriching the company's product line in the dental field; at the same time, biological repair films and light-curing composite resins have entered the registration and repair stage. Other products under development, such as calcium-silicon bioceramic bone repair materials, breast patches, and uterine cavity repair films, are in the clinical stage, and the product line is further enriched.

Maintain a “buy” rating. Based on the company's rich R&D pipeline, active biological bone is about to be released. EPS is expected to be 1.21/1.45/1.74 yuan in the next three years, maintaining a “buy” rating.

Risk warning: growth risk, risk of R&D falling short of expectations, risk of concentration of major products, industry policy risk, product quality risk, etc.