中泰证券:政策、基数影响下表现稳健 把握医疗器械创新驱动+业绩拐点投资机会

Zhongtai Securities: Steady performance under the influence of policies and fundamentals, grasping investment opportunities driven by medical device innovation+ inflection points

Zhitong Finance ·  May 13 14:57

The medical device industry continues to grow rapidly. It is optimistic about importation substitution and global development driven by innovation. Volume procurement policies will continue to be implemented, medical anti-corruption is expected to ease, and sector valuations are expected to gradually recover.

The Zhitong Finance App learned that Zhongtai Securities released a research report saying that the medical device industry continues to grow rapidly, is optimistic about import-substitution and global development driven by innovation, volume procurement policies continue to be implemented, medical anti-corruption is expected to ease, and sector valuations are expected to gradually recover. On the one hand, we continue to be optimistic that, with policy support and technology, competitiveness continues to improve, import substitution is accelerated, and domestic innovative brands are expected to continue to be rapidly released, including the establishment of medical care (300633.SZ), Mindray Healthcare (300760.SZ), and cardiac care (688016.SH); on the other hand, it is recommended to combine policy developments, industry supply and demand patterns, company operating pace, etc., to actively seize the bottom opportunities of high-quality targets with low valuation levels and which are expected to usher in marginal changes, including Antu Biotech (603658.SH) and Jiuqiang Biotech (300406). SZ), Sanyou Medical (688085.SH), Weili Medical (603309.SH), Beautiful Healthcare (301363.SZ), etc.

The main views of Zhongtai Securities are as follows:

The overall stability of the device sector under the influence of COVID-19, medical anti-corruption, etc.

In 2023, the revenue of listed medical device companies was 258.688 billion yuan, down 29.99% year on year, after deducting non-net profit of 32.843 billion yuan, down 61.31% year on year. Looking at sub-sectors, the 2023 deducted growth rate ranked from highest to lowest as medical equipment (+10.16%), high-value consumables (-11.02%), low-value consumables (-54.13%), and in vitro diagnosis (-88.83%). Policies such as new medical infrastructure and special debt have been implemented steadily, and the growth rate of medical equipment is good; the growth rate of the high-consumption sector declined due to the expansion of collection and anti-corruption; the growth rate of low-value consumables declined, mainly affected by the high base of protective and testing consumables during the same period; in vitro diagnostic sector, profits declined due to the COVID-19 testing business base and related asset disposal during the same period. Looking at a single quarter, the 2023Q4 medical device sector's revenue fell 26.02%, and net profit after deducting non-return to mother fell 69.12%. The slowdown in growth was mainly due to the promotion of domestic anti-corruption policies and the COVID-19 base for the same period.

It is expected to stabilize month-on-month in 24Q1, and the low-consumption sector performed well

In the first quarter of 2024, the overall revenue of the medical device sector fell 5.49% year on year, down 1.31% month on month, and after deducting non-net profit, fell 14.57% year on year, and increased 493% month on month. Looking at sub-sectors, the year-on-year revenue growth rate ranked from highest to lowest for low-value consumables (+5.72%), high-value consumables (+ 0.64%), medical equipment (-0.52%), and in vitro diagnostics (-18.93%). The performance of the low-consumption sector is expected to rise steadily after going through the overseas inventory digestion cycle, while equipment and high consumption are relatively stable due to short-term policy effects, while the IVD sector experienced a decline in growth due to the impact of the 23Q1 base for the same period.

In vitro diagnosis: The sector is expected to enter normalized growth, focusing on main lines such as national reform and overseas travel

Revenue from the sub-sector fell 59.93% in 2023 (-122.63pp, compared with the year-on-year change in 2022, same below), and net non-profit decreased by 88.83% year-on-year (-164.32 pp). The sector's performance declined markedly due to the COVID-19 base for the same period. In the first quarter of 2024, sector revenue declined by 18.93% (+50.93pp), and after deducting non-net profit, fell by -40.91% (+48.21pp). 24Q1 performance declined due to the rapid release of demand for diagnosis and treatment during the 23Q1 period and the impact of the post-pandemic related business, but the decline has narrowed significantly. Zhongtai Securities expects the sector to gradually enter a phase of normalized growth starting in 24Q2.

Based on the current policy environment, competitive landscape, etc., Zhongtai Securities is optimistic about two investment directions: 1) State-owned enterprise reform, which will continue to be deepened in 2024. The government work report, etc. continue to emphasize the need to improve the core competitiveness of state-owned enterprises and enhance their core functions. Zhongtai Securities expects that more national reform measures will continue to be implemented in the future, and related targets are expected to continue to benefit. It is recommended to focus on Jiujiang Biotech (+32.50%) and Dirui Healthcare (+5.40%). 2) The industry went overseas. After the epidemic, domestic brands ushered in good opportunities for development in overseas markets. In particular, breakthroughs in large sample size customer groups continued to accelerate. It is recommended to focus on leading companies such as Mindray Healthcare (+20.04%), new industries (+24.72%), and Ahuilong (-77.00%, +36.30% of non-COVID-19 revenue in 2023).

Medical equipment: Steady performance under the influence of industry rectification. Tendering is expected to resume in the second half of the year and the boom will pick up

Revenue in the sub-sector increased 10.83% (-3.23pp) in 2023, with year-on-year growth of 11.05% (-1.78pp) after deducting non-profit. The growth rate of the sector declined slightly, mainly related to some anti-epidemic related orders during the same period in 2022; 2024Q1 equipment sector revenue decreased by 0.52% (-21.80pp), net profit decreased by 8.12% (-42.66pp), and there was a slight decline in single-quarter performance, mainly due to anti-corruption. Since 2023Q3, regulatory policies in the medical industry have become stricter, and some medium and large equipment tenders have been affected to a certain extent. Zhongtai Securities expects the 2024Q3 regulatory policy to ease, and the backlog of procurement demand in the early stages is expected to continue to be released. The recommendation is to focus on leading companies such as Mindray Healthcare (+20.04%), Lianying Healthcare (+ 25.38%), and the establishment of leading companies such as Healthcare (+29.52%), and Australian China Endoscopy (+359.03%).

High-value consumables: seize the opportunity of harvesting at the bottom of the ground and continue to be optimistic about innovative varieties

In 2023, revenue from the sub-sector fell by 3.80% (-5.64 pp), net of non-profit decreased by 12.33% (+2.59 pp). The collection of consumables such as sports medicine, spine, and artificial lenses was implemented one after another. At the same time, medical adjustments affected the admission of new products, causing sector performance to fluctuate; revenue in the 2024Q1 sector increased by 0.64% (-2.90pp), showing a good recovery trend. Under the “exhaustive” trend, most high-value consumables have now been included in national or local procurement, and price reduction pressure has basically been released. The share of domestic bid wins for related varieties has increased significantly, and is expected to return to rapid growth in the future. It is recommended to focus on industry leaders such as Sanyou Medical (-55.70%), Chunli Medical (-7.32%), and continue to be optimistic about track leaders with strong R&D capabilities and rich innovative product layouts, such as Heart Care (+ 42.74%), Microelectrophysiology (+211.33%), and Huitai Medical (45.54%) et al.

Low-value consumables: Inventory digestion is nearing its end, and the inflection point of performance is expected to be near

Revenue in the sub-sector fell 7.59% (+14.68 pp) in 2023, net profit fell by -54.13% (+21.01 pp). Since 2023Q3, major overseas customers have been digesting inventory one after another, while compounding some anti-epidemic product technology during the same period. The sector's performance declined. 2024Q1 overseas customer inventory digestion basically ended, procurement orders gradually returned to normal, and Q1 sector revenue increased 5.72% (+ 16.33pp), net profit increased by 34.93% (+ 74.02%). The recovery trend is good. Demand for diagnosis and treatment in Canada is recovering steadily, and Zhongtai Securities expects related companies to enter an inflection point in performance one after another. The proposal focuses on adopting relevant targets such as shares (-38.98%), Weili Healthcare (+ 23.25%), Condler (-23.49%), and Zhonghong Healthcare (208.85%).

Risk warning: There is a risk that product marketing will not meet expectations; there is a risk that public data used in research reports may be delayed or new and untimely; industry data is screened and classified to a certain extent, and there is a risk of deviation from the actual situation in the industry, etc.

The translation is provided by third-party software.

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