Incidents:
1) The company released its 2023 annual report, achieving operating income, net profit attributable to mother, and net profit excluding non-return to mother of RMB 4.62/1.36/122 million, respectively, or +44%/45%/59% year-on-year. Net operating cash flow of $134 million, +56% YoY; EPS (basic) $2.00. In addition to the special securities account for repurchase, the company plans to distribute a cash dividend of 1.5032 yuan (tax included) to all shareholders, and at the same time transfer 4 shares for every 10 shares to all shareholders with a dividend payment rate of 75%. The results are in line with market expectations.
2) The company released its 2024 quarterly report, achieving operating income, net profit attributable to mother, and net profit excluding non-return to mother of 0.88/0.22/ 0.19 billion yuan, respectively, -8%/-28%/-27% compared with the same period last year. Net operating cash flow of 9.386 million yuan. EPS (basic) 0.32 yuan. The results were slightly lower than market expectations.
Comment:
Operations recovered significantly in 2023, with steady growth in 4Q23, and pressure on 1Q24 results: 4Q23 revenue, net profit to mother, and net profit after deduction of non-return to mother were 1.30/0.35/31 million yuan respectively, +24%/9%/8% year-on-year. The 4Q23 revenue growth rate slowed compared to the previous three quarters, which is related to industry policy fluctuations within and outside the hospital; the profit side growth rate was less than the revenue side, mainly due to an increase in share payment charges. In 2023, the company's revenue reached a record high, and profitability rebounded from the previous year. Net interest rate to mother and net interest rate after deducting non-return net interest rate were 29.5%/26.3%, respectively, +0.3 pp/2.5 pp year on year. Net interest rate excluding share payments and income tax effects was 33.1%, +4.1pp year on year. By product, revenue from magnetic stimulation products in 2023 was +47%, and sales volume was +38%, related to the launch of second-generation magnetic products and the increase in product unit price; revenue of electrical stimulation products +7% YoY, sales volume +22%, related to increased market competition and product unit price decline; revenue of electrophysiological products +31% YoY, and sales volume +17%, related to the launch and widespread promotion of second-generation group biofeedback devices; revenue of consumables and accessories products was +31% YoY, which achieved relatively rapid growth with the main product. 1Q24 The company's revenue and profit are under pressure, which is related to factors such as the slowdown in bidding.
Adhere to innovation drive, enrich product matrix, and optimize business structure: The company adheres to innovation drive and continues to invest in the development and construction of technical platforms such as magnetic stimulation, electrical stimulation, electrophysiology, rehabilitation robots, laser radio frequency, etc., to enrich product pipelines and technical reserves. In 2023, R&D invested 78 million yuan, +28% over the same period. 47 new authorized patents were added, 8 software copyrights were added, 5 domestic Class II medical device registration certificates, 1 Class III medical device certificate, and 2 FDA certifications were added. The original product was iteratively upgraded, and the 1H23 second-generation pelvic floor functional magnetic stimulator, second-generation transcranial magnetic stimulator, and second-generation group biofeedback were successfully launched. The “transcranial electrical stimulator” cooperation was successfully launched in late August '23 to further promote the application and development of transcranial magnetic stimulation and transcranial electrical stimulation technology in the field of neuroscience. Emerging products have been launched one after another. Plastic magnetic products obtained FDA certification in March 23 and domestic certification in November; obtained Class II medical registration certificates for high-frequency electrocautery devices and Class III medical registration certificates for semiconductor lasers in February and March 23, respectively; all clinical trials of picosecond laser therapy devices have been completed and are expected to be proven by the end of 24; radiofrequency anti-aging and radiofrequency lipolysis are progressing in an orderly manner. All first-generation rehabilitation robot products have been proven, covering the full cycle rehabilitation evaluation and training of the upper and lower limbs of the human body; in February '24, MagNeuro ONE series products were proven and expanded to transcranial magnetic robots.
Profit forecast, valuation and rating: Considering the slowdown in the pace of internal and external bidding and the increase in the company's R&D investment, the net profit forecast for 24-25 was lowered to 176/215 million yuan (down 3%/6% from the previous year), and the net profit forecast for the additional 26 years was 259 million yuan. The current stock price corresponding to 24-26 PE is 12 times 18/15/12 times.
As a leader in magnetoelectric joint rehabilitation equipment, the company is a blue ocean circuit with high card space growth. It adheres to innovation drive and actively expands rehabilitation and medical and aesthetic business, and is expected to benefit from the boom in the rehabilitation industry and the upgrading of consumer consumption. Maintain an “Overweight” rating.
Risk warning: Rehabilitation department construction is slowing down; failure to develop new products or poor marketing; medical policy risks, etc.