The policy of equipment updates in the medical field continues to be promoted, and is expected to gradually land in the second half of 2024, and domestic bidding and tendering is expected to significantly improve in the short term.
Futu Securities learned from the Intelligent Investment app that Ping An Securities has released a research report stating that some provinces have already issued pre-approval public notifications or approvals for medical equipment upgrade projects. According to some statistics, the disclosed amount currently exceeds 21 billion. It is expected that there will be a demand for hundreds of billions of scale equipment updates nationwide. The policy of equipment updates in the medical field continues to be promoted and is expected to gradually land in the second half of 2024. From the revealed categories, it is expected that large devices such as computed tomography (CT), magnetic resonance (MR), ultrasound, digital radiography (DR), and endoscopes will benefit significantly. Domestic bidding and tendering is expected to significantly improve in the short term, while the long-term logic of leading domestic companies going abroad remains unchanged. It is recommended to pay attention to relevant quality enterprises in the industry, such as Shenzhen Mindray Bio-Medical Electronics (300760.SZ), United Imaging Healthcare (688271.SH), Sonoscape Medical Corp. (300633.SZ), and AHF Holdings Ltd. (688212.SH).
The main points of Ping An Securities are as follows:
The policy of updating medical equipment continues to be promoted, and local detailed landing measures continue.
In March 2024, the State Council issued the "Action Plan for Promoting Large-scale Equipment Updates and Old-for-New Consumer Goods". According to the guidelines, it is expected that the investment scale of equipment in multiple fields such as industry, agriculture, construction, transportation, education, culture, and medical care will achieve an increase of more than 25% on the basis of 2023 by 2027. Since the national version of the document was released, various provinces have continued to announce the key points and plans for the implementation of medical equipment updates in the medical field, clearly defining the detailed indicators and specific implementation plans for updates and upgrades. The growth rate in some provinces in 2027 is expected to increase by about 28%-30% compared with 2023. The coverage of categories is gradually clear, and relevant fund support policies are gradually announced, which is expected to bring a significant increase in demand in the second half of the year, and usher in a new round of large-scale equipment update boom.
From the time schedule perspective, it is expected that medical institutions have already submitted projects for review in June. After the National Health Commission approves them, they will be submitted to the National Development and Reform Commission for approval. After approval, project announcements are required. Following the transfer of funds, relevant projects will be tendered and purchased in accordance with the schedule, or released in the third or fourth quarter, and related vendor order demands are expected to continue to improve. Currently, some provinces have already issued pre-approval public notifications or approvals for medical equipment upgrades. According to some statistics, the disclosed amount currently exceeds 21 billion. It is expected that there will be a demand for hundreds of billions of scale equipment updates nationwide.
Super long-term government bonds provide capital support, and there is expected to be rapid growth by 2027.
Ping An Securities believes that different from the last round of interest subsidies and loans, the capital support provided by the national and local governments is expected to activate more medical institutions' procurement needs. The plan clarifies that super long-term special government bonds will provide stable and supplementary funds, which will continue to subsidize until 2027, providing financial support for short- and medium-term medical equipment procurement updates. At the same time, local governments will also take out certain funds to provide support based on their own actual financial situation. Among them, Jiangsu mentioned that on the basis of actively seeking national funds such as central budget investment and special super long-term government bonds, etc., make good use of provincial health special funds to provide assistance and support for equipment updating in the medical and health fields. In addition, in response to self-raised funds from localities and hospitals, the country jointly launched supporting policies for subsidized loans to solve fund bottlenecks and promote large-scale equipment updates.
Medical equipment: It is expected that the promotion of equipment updates will promote the recovery of bidding and tendering in the short term and open up space for going abroad in the long term.
Recovery: From the perspective of the overall domestic medical equipment investment cycle, in July 2023, the special rectification action for the medical field began to be promoted nationwide, which greatly affected the bidding and procurement of medical institutions, especially in grassroots areas, resulting in a lower income base for related medical equipment manufacturers in the second half of 2023. Since 2024, the special rectification action in the medical field has eased, and the decline in bidding and procurement in the first quarter of 2024 has improved somewhat. However, since the second quarter, the policy of updating equipment has continued to be promoted, and some medical institutions are waiting for the funds to land, suppressing the procurement of regular demands. In addition, the special rectification action in medical care has fluctuated, and it is expected that the bidding and procurement will continue to remain low in the second quarter. The policy of updating medical equipment continues to be promoted, with sufficient support in terms of capital, and bidding and procurement of equipment is expected to recover rapidly in the second half of 2024. The suppressed demand is concentrated, and it is also expected to stimulate new demand, ushering in a high boom cycle for equipment in the second half of the year.
Going abroad: Leading domestic medical equipment companies' overseas business is flourishing, and their competitiveness in going abroad is further highlighted. In the earlier period, exports of low-end equipment were mainly exported, but as domestic products continue to break through high-end products and product upgrades continue to accelerate, the export of high-end equipment is expected to accelerate, and the long-term space continues to expand.
Risk warning: The policy landing is not as expected; the bidding and tendering recovery is not as expected; price fluctuations; the progress of going abroad is not as expected, and other risks.