Introduction to this report:
The company's performance in 2023 continues to be under pressure under the influence of collection. As the impact of collection gradually clears up, the business trend is expected to improve, and the rating of increasing holdings is maintained.
Key points of investment:
Maintain an increase in holdings rating. Considering the impact of collection, the 2024-2025 EPS forecast was lowered to 0.73/1.24 yuan (originally 0.91/1.33 yuan), and the 2026 predicted EPS was added to 1.63 yuan. The 2025 target PE 35X was given as a reference sector center, and the target price was maintained at 43.05 yuan to maintain the increase rating.
The impact of collection is gradually being clarified, and the performance trend is expected to improve. The company achieved revenue of 1,533 billion yuan in 2023 (+6.9% YoY, same below), net profit to mother of 59 million yuan (-36.3%), after deducting non-net profit of 111 million yuan (-88.5%). Performance continues to be under pressure due to collection. 2024Q1 achieved revenue of 427 million yuan (+9.2%), net profit of 62 million yuan (+6.1%), and net profit of 49 million yuan (+4.5%) after deducting non-net profit of 0.49 million yuan (+4.5%). It is expected that the performance trend will continue to improve as the impact of collection gradually clears up.
Trauma in 2023, the spine is still under pressure, and the joints are growing well. Traumatic revenue in 2023 was 572 million yuan (+5.5%). Collecting is still under pressure but weakening marginally. It is expected that there will be restorative growth as collection renewals are implemented one after another starting 2024Q2. Spine revenue was 284 million yuan (-39.9%). The impact of price cuts and channel inventory returns in the year of implementation was significant. It is expected that normal growth will gradually resume from 2024. Joint revenue was 156 million yuan (+167%), and in 2024, China's share of the renewal bid volume also increased from 1.2% for the first time to 3.4%. The development trend is good, and it is expected to become another pillar of the company's orthopedic sector in the future.
The non-orthopedic business is developing rapidly and has performed well overseas. The company's minimally invasive surgery, neurosurgery, and dental lines achieved revenue of 2.87/0.81 billion yuan in 2023, respectively, an increase of 50%/73%/111% year-on-year. The company's products are exported to more than 60 countries and regions, with overseas revenue of 216 million yuan (+174%) in 2023. The non-orthopedic high-value consumables business and overseas business are expected to bring the company a second growth curve.
Risk warning: Recovery after collection falls short of expectations, and new business growth falls short of expectations