Ten years of focus on the field of new Shenwai materials to provide overall solutions

The company is an enterprise in the field of neurosurgery in China that also has implantable medical device products such as artificial hard brain (spine) membrane patches, craniomaxillofacial repair and fixation systems, absorbable regenerated cellulose, and dural medical glue, covering a variety of core implantable medical devices required for mainstream neurosurgery. The company's business is growing rapidly, with a revenue CAGR of 23% in 2020-2023. By the end of 2023, the company's products had entered more than 1,600 domestic hospitals, and the international market covered nearly 90 countries and regions including Europe, South America, Asia and Africa.

Meningeal revenue accounts for the majority, and PEEK collection benefits as the main growth point in the short to medium term. Artificial hard brain (spine) membrane patches are the company's main source of revenue. The company accounts for about 12% of the domestic market. In 2022, this sector's revenue contributed 145 million yuan, accounting for 74% of total revenue. With the normalization of meningeal product collection, the company's related products have been selected in various provinces. At the same price, the company's meningeal products have excellent performance, and the market share is expected to increase steadily. According to Southern estimates, the market size of craniomaxillofacial repair and fixation products in China was about 1.75 billion yuan in 2023. Among them, the new material polyether ether ether ketone (PEEK) replaced traditional titanium: in 2017-2019, the market size of PEEK repair products in China was over 80%, while the growth rate of titanium composite was only 3.8%. Compared with traditional titanium, PEEK materials have material performance advantages, a better competitive pattern, and the industry is growing faster. The company's three PEEK products were successfully selected in the Henan 24 Interprovincial Alliance. This collection is expected to further accelerate the penetration rate of PEEK materials in the Shenwai repair market, which will benefit the company's PEEK revenue rapidly.

Hemostatic Yarn+Meningeal Gel was approved for listing, and it took 8 years to develop the first domestically produced hemostatic product (hemostatic yarn) that can absorb regenerated cellulose oxide (hemostatic yarn). Currently, this segment is dominated by Strong Growth Years. The company is actively exploring application scenarios and extending to other fields such as surgery. Rapid volume is expected to break the foreign monopoly pattern in the future. The company's self-developed dural medical adhesive was launched in February 2023. The amount of medical glue used in the US market is about 2.5 times that of meninges, while the domestic market is relatively empty. Currently, only two domestic companies have been approved, and the market space is broad. The company's revenue for hemostatic yarn+meningeal glue in 2023 was about 24 million yuan, an increase of 346% over the previous year; the company successfully won the bid for the 11 inter-provincial alliances in Inner Mongolia, and it is expected that the volume of hemostatic yarn will be accelerated through collection with other Shenwai varieties. We believe that hemostatic yarn+meningeal gel will become a faster growth point for the company in the medium to long term.

Investment advice

We expect the company's revenue in 2024-2026 to reach 280/3.61 billion yuan, an increase of 21.3/28.9/ 31.7%; net profit to mother of 0.55/ 0.85/130 million yuan, an increase of 35.2/54.2/ 52.9%; the corresponding EPS is 0.84/1.29/1.97 yuan; and the corresponding PE ratio is 47/31/20X. The company's short-term revenue comes from the collection and release of neurosurgical consumables and technology iteration. Combining the release of new hemostatic products+meningeal gels with overseas expectations contributed to the second growth curve. First coverage, giving a “buy” rating.

Risk warning

The amount collected and released fell short of expectations, product development fell short of expectations, and new product promotion fell short of expectations.