Conclusions and recommendations:
Company performance: The company released financial reports for 2023 and 24Q1. In 2023, it achieved revenue of 7.97 billion yuan, YOY +12.3%, recorded net profit of 2.40 billion yuan, YOY +50.2%, net profit of 1.84 billion yuan after deducting non-return to mother, YOY +46.8%, and the company's net profit growth rate was in line with expectations. On a quarterly basis, 23Q4 achieved revenue of 1.31 billion yuan, YOY +7.7%, recorded net profit of 210 million yuan, YOY -55.4%, net profit after deduction of 170 million yuan, YOY -43.2%; 24Q1 revenue of 2.23 billion yuan, YOY -17.4%, recorded net profit of 660 million yuan, YOY -7.6%, net profit net profit of 550 million yuan, YOY -21.7%, net profit growth rates declined in 23Q4 and 24Q1 respectively. Due to the peak of the COVID-19 and influenza epidemic, demand and reserves for epidemic prevention materials have increased the base period.
Dividend plan: A cash dividend of 8 yuan (tax included) is distributed for every 10 shares, with a dividend rate of 2.2%.
Iterative product optimization, gross margin level is higher than before the epidemic: although concentrated demand for epidemic materials helped increase gross margin in 23Q1 (23Q1 gross margin increased 2 percentage points year-on-year to 52.7%), the quarterly gross margin of 23Q3-24Q1 after the 2023 New Year's Day epidemic also reached 51.2%, 51.1%, and 49.9% respectively, far higher than the level of about 40% before the COVID-19 pandemic in 2020. We believe this is mainly due to the company's vigorous development of high-value-added products such as ventilators and blood sugar meters, which boosted the gross margin level. In 2023, the company's ventilators increased 30% year on year, atomization products increased by more than 60% year on year, and blood sugar meter revenue increased 37% year on year. As a leading civilian medical device, the company's continuous product iteration and development of new products will continue to help the company's performance grow.
The cost rate continues to decline due to the scale effect: the company's expense ratio for the 2023 period was 23.3%, down 2.8 percentage points from the previous year. Benefiting from the expansion of sales scale, all expense ratios declined. The fee rate for the 24Q1 period was 19.9%, down 0.1 percentage points from the previous year.
Profit forecast and investment suggestions: Looking forward to the future, the company's good brand value, the successive launch of new products, and the development of the retail market will help the company's long-term development. We expect the company to achieve net profit of 2.21 billion yuan, 2.49 billion yuan, and 2.81 billion yuan respectively in 2024-2026, YOY -7.7%%, +12.5%, and +13.0% respectively, equivalent to EPS of 2.21 yuan, 2.48 yuan, and 2.81 yuan respectively. The PE corresponding to the current stock price is 17 times, 15 times, and 13 times, respectively. The valuation is reasonable, and we maintain the “buy” investment proposal.
Risk warning: new product sales fall short of expectations; extension integration falls short of expectations; raw material prices rise above expectations; demand fluctuations brought about by the epidemic