Incident: 1) The company issued a voluntary disclosure notice for the 2024 semi-annual results forecast. It is expected to achieve revenue of 7.77 to 0.808 billion yuan (+25% ~ 30%) and net profit to mother of 3.91 to 0.419 billion yuan (+40% ~ 50%); 2) The company issued an announcement regarding the transfer of shares in Optimum Medical Device Inc. (OMD for short) using 65 million dollars of its own capital 72.37% equity.
The admission of new products successfully promoted steady growth, and the overseas market layout accelerated. From January to June 2024, the company's overall sales volume achieved good growth, which led to a rapid increase in net profit, mainly the innovative products Castor branch aortic stent and delivery system, Minos abdominal aortic stent and delivery system, and the Reewarmptx drug balloon dilatation catheter, and the new Talos straight thoracic aortic stent system and the number of patients admitted to the Fontus branch intraoperative stent system and the number of terminal implants growing rapidly. In addition, the company continues to develop local, municipal and county-level hospital markets, actively promote cooperation with leading regional industry customers around the world, continue to promote market access and promotion of aortic and peripheral interventional products in Europe, Latin America, Asia Pacific, etc., and clinical trials of new products are being carried out in an orderly manner before they are marketed.
It is proposed to wholly own Lombard to form a globally differentiated competitiveness. Lombard is a wholly-owned subsidiary of OMD (British and German company). It has a quality management system covering product R&D, production and sales that meet CE, FDA and Japanese PMDA requirements, and has a complete organizational structure and team. This transfer and wholly-owned OMD and its subsidiary Lombard are expected to empower the company in terms of products, technology, intellectual property and management systems, and help the company further enhance its globally differentiated competitiveness: on the one hand, Lombard's business has many years of technology accumulation and has formed a rich and highly competitive product pipeline. It has more than 20 years of product promotion history in developed countries such as Europe, America and Japan, and covers 23 countries; on the other hand, Lombard has advanced manufacturing process technology (such as automatic preparation, automatic sewing, automatic polishing, etc.) ), can empower and significantly improve the company's product performance and production efficiency, and is expected to gradually expand its application in developed products.
The operations of overseas subsidiaries continue to improve, and it is expected that deep collaboration will contribute to increased performance. According to the company's announcement, OMD's business performance has continued to improve in recent years, and operating income has continued to grow. In 2023, the year-on-year increase was 43.55% and losses gradually narrowed (2024Q1 was only a slight loss), and it is expected to turn a loss into a profit in 2024. At the same time, Heart Care plans to establish a business platform for the European market through this acquisition, build multiple overseas business centers to achieve deep market coverage, and further advance the internationalization strategy. According to the company's announcement, the European aortic valve stent market will reach 0.824 billion yuan in 2029 (accounting for 22.8% of the world, second only to the US). At the same time, the company is expected to gradually increase its market share in the European market from less than 2% in 2022 (according to the number of surgeries) to more than 10% in the next 5 years.
Investment advice: Cardiac Healthcare is a leading enterprise in the field of aortic and peripheral vascular intervention in China. The performance of its core products has partially reached the international advanced level, domestic and foreign markets continue to expand smoothly, and it is expected to gradually grow into a leading global enterprise in the cardiovascular field in the future. We expect the company's net profit from 2024 to 2026 to be 0.667/0.9/1.211 billion yuan, up 35.37%/35.07%/34.48% year-on-year, and EPS to 5.41/7.30/9.82 yuan respectively. The current stock price corresponding to 2024-2026 PE is 19/14/11 times, maintaining the “recommended” rating.
Risk warning: Risk of overseas market expansion falling short of expectations, risk of R&D progress falling short of expectations, risk of new product promotion results falling short of expectations, risk of product price reductions exceeding expectations.