Investment logic: The company is a leader in platform-based household devices. After the new management took office in 2020, it actively laid out the three high-growth tracks of respiratory and oxygen production, blood sugar and POCT, and disinfection and sensory control. During the pandemic, the products were exported globally, and the brand influence further expanded. Continue to be optimistic about the company's long-term growth space and overseas market potential.
Innovate and reshape, focusing on the three core tracks. After taking office in 2020, the new management proposed a new strategy of “innovating and reshaping medical devices”, actively laid out growth businesses, and began focusing on the three core growth tracks of breathing and oxygen production, blood sugar and POCT, and disinfection and sensory control. Research and development efforts continued to increase. 1) Respiration and oxygen production: The number of COPD and OSA patients in China is huge, the diagnosis rate is low, and there is plenty of room to improve treatment penetration. Household non-invasive ventilators are one of the main treatments for OSA and COPD patients. After the outbreak of the epidemic in 2020, the market share increased from 4.6% in 2019 to 7.3% in 2020, making it a leading domestic manufacturer. The latest product, the third-generation ventilator, was approved in 2023, and is expected to maintain a stable leading position in the ventilator sector with a rich product echelon and high brand awareness. 2) Blood sugar and POCT: Through years of deep cultivation in the field of traditional blood glucose meters, Yuyue has become one of the leading domestic producers. In 2021, it entered the CGM field through the acquisition of Kellit, further strengthened its strength in the blood sugar monitoring sector, and collaborated with online and offline channels of traditional blood sugar meter products to actively promote CGM products. The CT15, the latest generation CGM product launched in 2023, has greatly improved compared to CT2 in terms of size, accuracy, and usage compliance, and the product strength has been further enhanced.
The POCT market maintains a relatively rapid growth rate of about 10-20%. Yuyue's product line is rich, and many products are under development. The product matrix continues to expand, and competitiveness is expected to gradually improve. 3) Disinfection control: Mainly developed by Shanghai Zhongyou, a wholly-owned subsidiary acquired in 2016, it has more than 400 products, including famous brands such as “Jiefourou” and “Aner Iodine”. Thanks to years of hard work in infectious disease prevention and infection control segments, revenue and profit increased significantly after the outbreak of the epidemic in 2020, while the brand's influence was further expanded. While deepening the inside of the hospital, it is expected to increase the coverage of public places outside the hospital, including hotels, restaurants, etc., and channel coverage is expected to continue to expand.
Steady and promising businesses go hand in hand, opening up medium- to long-term growth space in overseas markets. The company's cornerstone businesses, such as blood pressure monitoring, temperature monitoring, and traditional Chinese medicine equipment, all have high brand awareness and influence, and are expected to maintain steady growth. Potential businesses being incubated include first aid, ophthalmology, intelligent rehabilitation, etc., laying a good foundation for the company's longer-term development. Looking at overseas expansion, after the outbreak of the epidemic in 2020, due to increased global demand for ventilators and oxygen concentrators, the company's related products were released overseas. At the same time, the company is also strengthening overseas territorial team building, and the global brand influence is expected to continue to be strengthened. As the overseas registration process for many of the company's products is gradually being implemented, overseas development can be expected.
Profit forecasting and valuation: The company is a leading platform-based household equipment company with strong brand power. After 2020, through innovation and reshaping, focusing on the three high-growth tracks, we expect net profit to be 2.15 billion yuan, 2.54 billion yuan, and 2.98 billion yuan respectively in 2024-2026, with growth rates of -10.1%, 18.0%, and 17.4% respectively. The PE corresponding to the current stock price is 18x, 16x, and 13x respectively, covering the first time, giving a “buy” rating.
Risk warning: Product sales fall short of expectations; overseas expansion falls short of expectations; risk of deteriorating competitive landscape.