Ping An's point of view:
A domestic leader in the field of electrophysiology, future growth can be expected. Since its establishment in 2010, the company has been deeply involved in the field of cardiac electrophysiology. It is currently one of the few manufacturers in the global market that has completed a complete layout of cardiac electrophysiology equipment and consumables at the same time. It is also the first domestic manufacturer that can provide a complete solution for 3D cardiac electrophysiology equipment and consumables. The company has a complete and experienced team. General manager Sun has worked at the Siemens Research Institute in the United States. He has been deeply involved in the industry for nearly 20 years and is a senior expert in the field of electrophysiological device research and development in China. Based on long-term R&D accumulation, the company has overcome many key technologies, filled the gap in domestic production, and broken the long-term monopoly position of foreign giants in this field. It has now developed a product layout that comprehensively covers cardiac electrophysiological surgery, forming a rich product matrix to provide integrated solutions. The company's operating data performed well, and revenue continued to grow rapidly. In 2023, the company achieved revenue of 0.329 billion yuan, +26.5% over the same period. The CAGR reached 29.4% in 2019-2023. After the collection and implementation, the company continued to increase the number of surgeries and accelerate the release of high-end products, and the quality of operations continued to improve, and the net interest rate is expected to maintain a continuous upward trend.
The market blueprint for cardiac electrophysiology is broad, and domestic substitution is underway. Cardiac electrophysiology is mainly used for interventional treatment of tachyarrhythmia symptoms. The number of patients with tachyarrhythmia in China is huge, and there are still many unmet needs. On the demand side, the number of patients with atrial fibrillation and supraventricular fibrillation in China exceeded 23 million in 2022, but the penetration rate of electrophysiological treatment is very low compared to overseas markets; on the supply side, electrophysiological technology is not mature, and product innovation and iteration have existed for a long time. According to Frost & Sullivan statistics and forecasts, the number of electrophysiological surgeries in China increased from 0.138 million in 2017 to 0.214 million in 2021, with a CAGR of 11.6%. It is expected to reach 0.575 million cases in 2025, and the CAGR in 2020-2025 is 28%.
Judging from the competitive landscape, the current localization rate of the industry is less than 20%, and there is plenty of room for domestic replacement.
By focusing on overall solutions and seizing the opportunities of collection and release, the proportion of high-end products is expected to continue to increase. As a domestic manufacturer with the most complete layout in the field of cardiac electrophysiology products, the company has a clear first-mover advantage through the 3D labeling system and is expected to fully enjoy the dividends of industry development. The company has the first high-end catheter products approved in China before many projects, such as high-density measurement catheters, pressure-sensitive radiofrequency ablation catheters, etc. After more than a year of cultivation, it has fully entered high-end markets such as atrial fibrillation. This year, it is expected to usher in a rapid release period, further opening up room for growth. It is worth mentioning that the company has a comprehensive layout of radiofrequency ablation technology (fire), cryoablation technology (ice), and pulse ablation technology (electricity). It is one of the companies with the most complete layout in the industry, providing a more complete diagnosis and treatment plan for patients with tachyarrhythmia. Electrophysiological harvesting has already been implemented in most regions of the country, and future price expectations are clear. As a domestic leader, the company is expected to seize the opportunity to gain more share; as of 2024Q2, the impact of the high price base on reporting terminals has basically been cleared, and it is expected that it will enter a steady growth stage in the future, and long-term development can be expected.
Investment advice: The company is a leading company in the field of electrophysiology. It has remarkable product and technical advantages, and can fully benefit from the 10 billion and rapidly expanding electrophysiology circuit. Therefore, we expect the company to maintain rapid growth. We expect to achieve revenue of 0.469/0.658/0.895 billion in 2024/2025/2026, respectively, and continue to increase profit margins. Covered for the first time, with a “Recommended” rating.
Risk warning: 1) Product sales fall short of expectations; 2) New product promotion falls short of expectations; 3) The impact of national collection policies, etc.