Key points of investment:
Nanwei Medicine has focused on the field of minimally invasive endoscopic diagnosis and treatment devices for more than 20 years. It is a leading enterprise with strong innovation capabilities, rich product lines, obvious scale advantages, and a wide range of international channels in the industry. In 2023, the company proposed a new concept of shifting from scale growth to value growth, actively promoting strategic transformation through specific open source, efficiency improvement, and cost reduction measures to achieve high-quality sustainable growth in the new market environment.
The increase in the penetration rate of digestive endoscopy is driving the endoscopic diagnosis and treatment equipment industry to expand the global endoscopic consumables market to exceed 6 billion US dollars in 2022, and is expected to maintain a compound growth rate of 6%-7% in the next few years; the Chinese market is growing faster than the world due to the increase in the development rate of gastroenteroscopy and the promotion of early diagnosis and screening of gastrointestinal tumors. The big three overseas companies, Boston Scientific, Cook, and Olympus, monopolize more than 70% of the global endoscopic consumables market. Domestic companies are actively narrowing the technology gap and breaking through the overseas monopoly situation; in the context of domestic procurement policies and DRG health insurance fee control, the trend of domestic substitution is gradually deepening.
Focus on disposable endoscopy technology to open up a second growth curve
The company is the company with the most complete product line of endoscopic diagnosis and treatment equipment consumables in China. In recent years, it has focused on the development of visualization products, obtained market recognition through the first domestic disposable cholectoscope, and obtained registration certificates in the US, the European Union, and Japan; at the same time, it has expanded its application fields to departments such as hepatobiliary surgery, surgical cholangioscopes, etc., and has developed microbiliary biopsy forceps, miniature stone extraction balloons and other supporting consumables for the diagnosis and treatment of related diseases.
In 2023, the revenue from visualization products was nearly 0.1 billion yuan, accounting for 4% of the company's total revenue, and there is plenty of room for gross margin increase.
Sales channels have been gradually improved, and the international strategy has achieved remarkable results
The company continues to deeply cultivate overseas markets, gradually improving its product design and quality system construction through early cooperation with OEMs and overseas brands; starting in 2007, the company established its own brand and gradually expanded direct sales channels. Currently, the company has wholly-owned subsidiaries in the United States, Germany, the United Kingdom, France, the Netherlands, Japan, Portugal and Switzerland, and the share of direct sales continues to increase. Overseas business revenue in 2023 was 1.042 billion yuan, up 26% year on year, better than domestic growth, accounting for 43% of overseas revenue. At the same time, the company invested in the construction of a production base in Thailand, implemented an overseas strategic layout, and further expanded its overseas ecological advantages.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 2.936/3.584/4.371 billion yuan, with year-on-year growth rates of 21.76%/22.07%/21.96%, net profit to mother of 0.597/0.758/0.966 billion yuan, respectively, with year-on-year growth rates of 22.93%/26.87%/27.47%, respectively, and a 3-year CAGR of 25.74%, corresponding PE of 20/16/12 times. Considering that the company is a leading domestic endoscopic diagnosis and treatment consumables, has a perfect global layout, and has created a second growth curve through disposable endoscopes, covering and giving a “buy” rating for the first time.
Risk warning: Overseas market expansion risk; competition increases risk; volume procurement risk.