Key points of investment:
The two major production lines of ultrasonography and endoscopy are working together, and the development pattern of multiple product lines has initially taken shape.
Established Medical for more than 20 years, it has focused on independent research and development of core technology, ultrasonic+endoscopy has led technological innovation. Caichao has upgraded from the middle and low end to the high-end, and the endoscopy product line has developed in depth and breadth. It already has strong brand influence and core competitiveness in the fields of ultrasound and digestive endoscopy around the world, and is gradually emerging in the field of minimally invasive surgery and cardiovascular intervention. The company's revenue in 20-23 was about 22%, the ultrasound business revenue in '23 was 1.22 billion yuan (+13.3% YoY), and the endoscopy business revenue was 850 million yuan (+39% YoY).
High-end ultrasound continues to enhance brand power, and endoscopy continues to grow rapidly and has developed into a core growth business.
1) Color ultrasound has entered the ultra-high-end field, and its profit contribution has steadily increased: the company has achieved full coverage from cost-effective products to high-end color ultrasound, and has moved into the ultra-high-end color ultrasound field through technological transformation. The gross margin of ultrasound has increased to 65.9% in '23, which is at a high level in the industry. In the early stages, it was dominated by cost-effective products; at the end of '18 and '19, the P60 series was the first domestic high-end ultrasound for obstetrics and gynecology; in '23, the ultra-high-end color ultrasound S80/P80 was launched, making it one of the few domestic manufacturers to enter ultra-high-end ultrasound for whole body intervention and obstetrics applications. 2) The endoscopy business's revenue CAGR reached 40% in 20-23, and the leading position of domestic soft lenses was stable: the HD-500, the first domestic high-definition digescope system was launched in '16; after the launch of the HD-550 in '18, sales increased dramatically in '19, establishing the leading domestic soft lens position; launched the upgraded high-end HD-580 in '23, and launched the first ultrasound probe for bronchoscopes in China to enhance production line integrity and market competitiveness, and stabilize the leading position of domestic soft lenses.
The ecological layout of minimally invasive surgery introduces high-end talents to create a period of rapid development in microsurgery.
Supported by technology accumulation, the company launched a multi-department overall solution in the field of minimally invasive surgery, which created the company's unique competitive advantage with hyperabdominal, double mirror, and multi-mirror combinations. The release of the three-chip 2K hard lens in '19 marked the company's official entry into the hard lens market; in '23, the launch of a 4K ultra-high-definition multi-modal camera system and a 2K soft and hard mirror integrated camera system, and the surgical platform expanded to compatible soft lens models. The company introduced high-end talents in the surgical field in the 3rd quarter of '23, and announced a new round of equity incentive plans for surgical teams in August '23. Under performance assessment target A, domestic surgical business revenue in 23-26 was not less than 1/145/400 million yuan (the 24-26 growth rate was 45%/72%/60%).
Profit forecasting and investment advice
We expect the company's 2023-2026 revenue CAGR to be 25.1%, net profit CAGR to mother of 28.2%, and the current stock price is 31/24/19 times PE. Considering the large demand space for endoscopic diagnosis and treatment, the soft mirror market is entering a booming circuit. At the same time, the company has a unique competitive advantage. It is expected to take the lead in developing into the third growth curve, cover for the first time, and give it a “buy” rating.
Risk warning
Market competition increases risk; new product promotion falls short of expected risk; overseas business expansion falls short of expected risk.