Incident: The company released its report for the first quarter of 2024. In the first quarter of 2024, it achieved operating income of 358 million yuan (+25.38%), net profit to mother of 184 million yuan (+47.62%), net profit of 178 million yuan (+48.91%), and operating cash flow of 212 million yuan (+77.53%).
Profit growth in the first quarter exceeded expectations, and new product sales and cost optimization contributed to an increase in profit. The revenue side of 2024Q1 has maintained steady growth, and the profit side growth rate has increased significantly. In addition to the steady increase in production and sales due to the wide recognition of the company's main products, it is expected that the increase in the share of high-end new product sales will drive further improvements in gross margin (76.52%, +0.79pct), and the optimization of the cost ratio during the period will cause the overall net profit margin to a higher level. The 2024Q1 company's sales expense ratio was 7.42% (-1.36pct), the management expense ratio was 3.52% (-1.10pct), and the R&D expense ratio was 6.48% (-6.21pct). Among them, the sharp decline in R&D expenses was mainly due to the company optimizing the R&D team structure, evaluating and optimizing the commercialization potential of the project, and further improving the R&D input-output ratio.
The aorta and peripheral vessels form high-quality pipelines, and the progress of new product development is in line with expectations. After years of intensive cultivation, the company has an absolute dominant share in the aortic incision treatment market, and won the first peripheral artery stent CROWNUS in China. It has developed a series of related products such as Reewarm PTX drug balloon dilation catheters, and has developed into a leading aortic vascular interventional medical device company in China. The company has obtained certification for 13 products and CE certificates for 5 products, and has gradually formed a complete product line in the field of aortic and peripheral vascular intervention. In terms of new products, self-developed blocking balloons, Cratos, and Vflower have submitted registration data. AegisII is in the pre-marketing clinical trial stage, the Vewatch venous venous filter and Fishhawk mechanical thrombectomy catheter have completed pre-marketing clinical implantation, the HepaFLOW TIPS laminating stent system has been approved for the special review process for innovative medical devices (clinical follow-up phase), and the next-generation peripheral bare balloon catheter and fibrous hair plug spring ring are all in the registration stage. Pre-marketing clinical trials for underknee drug balloon dilatation catheters stage.
Deepen the channel layout of the domestic sinking market, and successfully introduce innovative products from overseas. 1) Domestic: The company continues to increase its marketing channel layout for second-tier third-tier cities and some populous counties, and the product market coverage has been further increased. Castor has covered more than 1,000 terminal hospitals, Minos has covered more than 800, and Reewarm PTX has covered more than 900; 2) Overseas: Currently, sales have covered 31 countries, and Castor has achieved its first implantation in Singapore and several European countries (cumulative entry into 16 countries); Minos achieved its first implantation in Turkey and other countries (cumulative entry) 19 countries); Hercules Low Profile achieved its first implantation in Singapore and several European countries (21 countries in total); Reewarm PTX achieved its first implantation in Brazil.
Investment advice: Cardiac Healthcare is a leading enterprise in the field of aortic and peripheral vascular intervention in China. The performance of its core products has partially reached the international advanced level, domestic and foreign markets continue to expand smoothly, and it is expected to gradually grow into a leading global enterprise in the cardiovascular field in the future. We expect the company's net profit from 2024 to 2026 to be 6.69,00/1,211 million yuan respectively, up 35.37%/35.07%/34.48% year-on-year, and EPS to be 8.06/10.88/14.64 yuan respectively. The current stock price corresponding to 2024-2026 PE is 23/17/13 times, maintaining the “recommended” rating.
Risk warning: Risk of overseas market expansion falling short of expectations, risk of R&D progress falling short of expectations, risk of new product promotion results falling short of expectations, risk of product price reductions exceeding expectations, risk of collection policies exceeding expectations.