Core logic: We believe that the company is a leading domestic manufacturer of precision components. Currently, the household ventilator components and cochlear implant components business has maintained steady development. Due to the good scalability of underlying technologies such as liquid silicone, precision molds, and automation, the company gradually expanded customers in other medical fields such as monitoring, intervention, and drug administration, as well as in the household consumer electronics sector such as coffee pot components, to achieve a diversified layout, and the business showed good growth.
Consolidate the two cornerstone businesses, continue to deepen cooperation with major customers, and the “ventilator components” and “cochlear implant components” businesses are developing steadily. The company is the core supplier of leading enterprise customer A in the household ventilator market and customer B, a leading enterprise in the global market for cochlear implantation. As cooperation continues to deepen, the “ventilator components” and “artificial cochlear implantation components” businesses have become the company's cornerstone business, accounting for more than 70% of total revenue.
① Household ventilator components business: Affected by the phased inventory removal of downstream customers in 2023, the household ventilator component business fell 18%. We believe that the fluctuation in the household ventilator business sector may be temporary. It is expected to gradually recover in the future as inventory removal comes to an end, and the cooperation between the company and customer A still has a lot of room to expand. In 2018-2020, the company's sales to customer A only accounted for about 7% of customer A's operating costs, while domestic ventilator manufacturers (taking Yihe Jiaye as an example) accounted for about 45% of the direct material costs.
② Cochlear implantation business: There are many disciplines involved in cochlear implantation technology, and the technical threshold is high. The relevant business revenue increased from 33.12 million yuan in 2018 to 114 million yuan in 2023, with a compound annual growth rate of 28%. In the future, as customer B's market size continues to expand, the company's cochlear implant business is also expected to maintain steady growth.
Relying on the hard power of technology to accelerate the expansion of new customers, the diversified layout is beginning to show results. With strong research and development capabilities for medical device components and products, precision mold design and manufacturing technology, and automated production systems development and innovation capabilities, the company has established high brand awareness in the industry and continuously expanded new business areas. Currently, it provides development and production services for many of the world's leading medical device companies such as Mindray, Johnson & Johnson, Siemens, Abbott, and Resontech hearing segments. Due to the good scalability of the underlying technology, the company has also gradually expanded segmented tracks such as electrophysiology, instrument disinfection, surgical robots, ophthalmic equipment, blood sugar management, in vitro diagnosis, etc., as well as household consumer electronics products such as coffee machine components and mobile phone waterproof components. The gradual increase in the company's customers, product lines, and application areas has driven the growth of the company's sales revenue. In 2023, excluding “ventilator components” and “artificial cochlear implantation components,” the overall revenue growth rate of the remaining sectors reached 38%. Among them, household and consumer electronics components achieved revenue of 150 million yuan (yoy +94%), and the new business showed good growth.
Profit forecast and investment suggestions: We expect the company's 2024-2026 revenue to be 1,673 billion yuan, 2,088 billion yuan, respectively, with year-on-year growth rates of 25.0%, 24.6%, and 24.2% respectively. The net profit to the mother in 2024-2026 will be 393 million yuan, 493 million yuan, and 616 million yuan, up 25.5%, 25.0% year-on-year respectively. Corresponding to the current stock price PE is 28, 23, and 18 times, respectively. For the first time, we have given the company a “buy” Investment ratings.
Risk factors: risk of major customer dependency; risk of exchange rate fluctuations: risk of new business development falling short of expectations; risk of gross margin fluctuations.