1Q24 is pressured by short-term performance growth due to fluctuations in downstream demand, and the subsequent recovery of the company's 1Q24 operating income/net profit attributable to mother/net profit without return to mother was 0.90/0.40/ 0.35 billion yuan, -18%/-24%/-34% year-on-year. We believe that consumer medical demand has not fully recovered in 1Q24, and the decline in the volume of neurosurgery and dental implant surgeries has put pressure on the growth rate of performance. We expect the 24-26 EPS to be 1.24/1.52/1.83. We gave the company a PE valuation of 30x in 2024 (comparable to the company's 24-year average expectation of 30x), corresponding to a target price of 37.15 yuan, maintaining a “buy” rating.
1Q24's R&D expense ratio decreased year-on-year, and gross margin decreased slightly year-on-year. The company's 1Q24 sales/management/R&D/finance expense ratio was 23.92%/6.88%/9.19%/-0.29%, +0.61/+1.12/-1.64/+0.02pct year-on-year. 1Q24 gross profit margin was 87.30%, -2.48pct year over year.
The dental business is expected to benefit from a recovery in demand for diagnosis and treatment. It is expected that it will resume steady growth in 24 in 23 years due to the impact of doctors' enthusiasm for surgery after implant collection and implementation. The number of surgeries has declined, and the growth rate of dental business revenue has slowed; consumer medical demand has not fully recovered in 1Q24. We expect that with the further recovery of consumer medical demand, the number of surgeries is expected to gradually improve. The company's revenue growth rate for oral repair masks and bone powder is expected to return to 20% year-on-year in '24.
The new product active biological bone is expected to be released in 24, and revenue from meningeal products remains stable. Clinically, the company's new product active biological bone has been clinically proven to be superior to traditional bone repair materials. Compared with foreign competitors, it is expected to reduce side effects, has high R&D barriers, and is a promising variety. The company completed the conversion verification of active biological bone in '23 to meet product marketing and sales needs. We expect to gradually release active biological bone starting in '24. The company's collection of meningeal products from all provinces won the bid. The competitive pattern is relatively stable, and the market share continues to increase. We expect meningeal revenue to remain stable in 24 years.
It is expected to benefit from the recovery of diagnosis and treatment and maintain a “buy” rating
We maintain our profit forecast. We expect the company's net profit to be 2.23/2.73/329 million yuan for 24-26, +16.7%/+22.6%/+20.4% year over year. The current stock price corresponds to PE 19x/15x/13x, adjust the target price to 37.15 yuan (previous value: 34.67 yuan), and maintain the “buy” rating.
Risk warning: The progress of new products is not as good as expected; the volume of collected products is lower than expected.