2023 performance growth is steady, 2024Q1 performance is under pressure in the short term
Incident: The company released a performance report. In 2023, it achieved operating income of 34.93 billion yuan, an increase of 15.0% year on year; net profit to mother was 11.58 billion yuan, up 20.6% year on year; net profit after deducting non-return to mother was 11.43 billion yuan, an increase of 20.0% year on year. The first quarter of 2024 achieved operating income of 9.37 billion yuan, up 12.1% year on year; net profit to mother of 3.16 billion yuan, up 22.9% year on year; net profit after deducting non-return to mother of 3.04 billion yuan, up 20.1% year on year; and net operating cash flow of 2.86 billion yuan, up 114.9% year on year.
Domestic business is expected to recover quarterly. The rapid overseas growth trend is expected to continue in the subregion. On the domestic side, domestic growth will be 14.5% in 2023, of which 2023H1 will grow by 27%. The second half of 2023 was affected by industry restructuring, and performance was under pressure. However, we believe that demand for in-hospital equipment is still there, all postponed purchases are expected to be released in the future, and domestic public hospital bidding activities are expected to show a quarterly recovery trend in 2024. Furthermore, according to company statistics, the new domestic medical infrastructure involved in the company's business still has more than 20 billion yuan of business opportunities to be released, and the company is expected to fully benefit from the domestic medical equipment trade-in policy, which will make a positive contribution to the company's performance growth in the next few years. Internationally, the company achieved 15.8% growth in 2023, with 22% growth in the second half of the year. Developing countries still showed the most impressive growth rate. The annual growth rate exceeded 20%, and the North American market had a compound growth rate of 18% for two consecutive years. Thanks to the fact that the competitiveness of the PMLS production line has fully reached a world-class level, and the penetration of high-end customer groups has accelerated; the overseas IVD business is rapidly advancing to medium and large sample volume laboratories; and the ultrasound business maintains a leading edge on a global scale, we believe that the high growth trend of the company's overseas business is expected to continue.
The IVD production line performed well. The number of overseas medium and large sample volume customers continued to rise, and the IVD production line achieved rapid growth of 21.1%. Since March 2023, routine domestic diagnosis and treatment activities have recovered rapidly, driving domestic IVD to achieve rapid growth of 20% throughout the year, with reagent revenue increasing by more than 25%. The compound growth rate of international IVD exceeded 30% for two consecutive years, broke through more than 100 new ICLs overseas, and ranked fourth for the first time in the domestic light-emitting market with more than one imported brand. The PMLS production line grew by 13.8%. Among them, international PMLS grew by more than 20% in the second half of the year, minimally invasive surgery in the seed business grew by more than 30% throughout the year, and the market share of hard mirror systems rose to third place in the country. The MIS production line grew by 8.8%, with high-end ultrasound models growing by more than 20%. For the first time, the ultrasound market position reached number one in the country and third in the world.
We believe that as the impact of industry rectification weakens and in-hospital tenders are normalized, all lines of the company are expected to experience restorative growth.
After completing the construction of an intelligent medical ecosystem, the company's business fully moved towards digital intelligence. The company focused on building long-term, differentiated overall solutions based on a broad business layout, leading market position and continuous growth in installed capacity. Through integration with artificial intelligence, it initially completed the construction of an “device+IT+AI” intelligent medical ecosystem. Through the integration and innovation of the “Sanrui” ecosystem and equipment, combined with big data and artificial intelligence, it provided medical institutions with overall digital intelligence solutions. In 2023, “Sanrui” digital intelligence products performed well. The “Ruizhi Link” ecosystem added more than 400 new installed hospitals, “Ruiying Cloud ++” added nearly 5,500 new installed machines, and the “Mindray Smart Test” test solution added 65 new installations. The company's business is fully moving towards digital intelligence, which is expected to drive the company's equipment sales growth. On the epitaxial side, through the acquisition of Huitai Healthcare, the company entered the relevant circuit in the cardiovascular field, enhanced business accessibility and market space, and cultivated new performance growth poles.
Profit forecasting
We expect the company's revenue in 2024-2026 to be 420.3/506.0/60.73 billion yuan, respectively, and net profit to mother of 140.3/169.6/20.44 billion yuan respectively, corresponding EPS of 11.57/13.99/16.86 yuan/share, respectively. The current stock price corresponding PE is 26.11/21.60/17.92 times, respectively, giving a “buy” rating.
Risk warning:
Market competition increases risk; international business promotion falls short of expected risk; new product launch falls short of expected risk.