Performance Brief
On July 1, 2024, the company released its 2024 semi-annual performance forecast. It is expected to achieve revenue of 0.777 billion yuan to 0.808 billion yuan, +25% to +30% year-on-year; net profit to mother of 0.391 billion yuan to 0.419 billion yuan, +40% to +50% year-on-year.
On the same day, the company announced the transfer of shares in Optimum Medical Device Inc. (OMD). It plans to use its own capital of 65 million US dollars (approximately RMB 0.463 billion) to transfer 72.37% of OMD's shares. After completion, OMD will become a wholly-owned subsidiary of the company.
Management analysis
Sales grew rapidly in the first half of the year, and domestic and foreign markets expanded simultaneously. In the first half of 2024, the company's innovative products Castor, Minos aortic laminating stents, and Reewarm PTX drug balloons continued to grow. The number of new Talos aortic stents and Fontus intraoperative stents admitted to the hospital and terminal implants increased rapidly. The domestic market for municipal and county hospitals continues to be developed, and overseas sales promotion continues to advance in key regions such as Europe, Latin America, and the Asia-Pacific region.
Further acquisition of Lombard will expand the aortic product layout. OMD wholly owns two of its subsidiaries, Lombard Medical Limited (UK) and Lombard MedicalTechnologies GmbH (Germany) (collectively known as Lombard), and has a promotion history of more than 20 years in developed countries such as Europe, America, and Japan. The products have covered 23 countries. Core abdominal aortic products such as Aorfix and Altura will complement the cardiovascular product pipeline. Since 2017, Xinmai has been cooperating with Lombard. In March 2022, it acquired 27.63% of OMD's shares through capital increases and transfers. After this acquisition, OMD will become a wholly-owned subsidiary of Xinmai.
OMD's profit situation is gradually improving, and overseas market expansion is expected to accelerate. OMD's revenue in 2023 reached 0.112 billion yuan, +43.55% year over year, net profit - 4.18 million yuan, and losses are gradually narrowing. The company expects to turn a loss into a profit in 2024. Since OMD has advanced manufacturing process technology, it will improve overall product performance and production efficiency in the future.
At the same time, OMD will use its mature market and channel resources to provide a foundation for overseas expansion in the cardiovascular aortic field, and the company's overseas market expansion is expected to accelerate in the future.
Profit Forecasts, Valuations, and Ratings
We are optimistic about the company's competitiveness in the field of aortic and peripheral intervention. We expect the company's net profit to be 0.639, 0.796, and 1.039 billion yuan respectively in 2024-2026, increasing 30%, 25%, and 30% year-on-year. The current price corresponds to PE 19, 15, and 12 times, maintaining a “buy” rating.
Risk warning
Health insurance fee control policy risks; risk of new product development falling short of expectations; risk of product promotion falling short of expectations; risk of overseas trade friction.