Incident: The company released its 2024 semi-annual report, achieving operating income of 0.69 billion yuan (+18%), net profit of 0.11 billion yuan (+18.7%), and net profit of non-return to mother of 0.09 billion yuan (+20.4%).
The performance achieved relatively rapid growth and increased profitability. On a quarterly basis, revenue for Q1/Q2 in 2024 was 0.33/0.36 billion yuan, with year-on-year growth rates of +21%/+15%, respectively, and net profit to mother of 0.05/0.05 billion yuan, respectively. The year-on-year growth rates were +19.7%/+17.8%, respectively, mainly driven by the company's rapid growth rate of blood purification products. In terms of profitability, 2024H1 has a gross margin of 35.1% (+1.5pp), a sales expense ratio of 6.3% (+0.6pp), a management expense ratio of 6.7% (-0.7pp), R&D expenses ratio of 4.1% (+0.9pp), and a net profit margin of 16.8% (+0.2pp). Profitability has improved.
Blood purification products are growing rapidly. By business, revenue from 2024H1 blood purification products was 0.52 billion yuan, up 25.6% year on year. The main reason was that the company achieved remarkable results in developing domestic and foreign markets. The business performance of the dominant products hemodialysis devices, hemodialysis solutions (powder), and hemodialysis pipelines grew rapidly, and export orders for hemodialysis equipment increased. Revenue from infusion products was about 0.1 billion yuan, a year-on-year decrease of 13.2%. Cardiothoracic surgery revenue 0.03 billion yuan (+4.9%). In 2022, the company entered a new circuit of vascular intervention, and PTA hyperbaric balloon dilatation catheters were approved for sale. Currently, there are more than 30 research projects under development, which are expected to contribute to the increase in 2024.
Henan Union hemodialysis consumables were collected and implemented, and the company's pricing strategy was clear. The decline in hemodialysis collection this time is relatively moderate. Domestic manufacturers have clear pricing strategies, and the localization rate is expected to increase further. Prices for relatively mature varieties such as hemodialyzers (high throughput) are relatively high. For example, Weigao dropped 43%, and Sanxin Medical dropped 50%. According to Rule 1, they ranked second and fourth respectively in terms of selection price. Through better bid prices, domestic enterprises are expected to retain profit margins. For products with a relatively good competitive pattern, such as indwelling needles for dialysis (4 foreign-funded, 1 domestically produced), Sanxin Medical is the first domestically produced registration certificate for this product. The targeted price is low, with a decrease of 70%, so it is expected that price can be quickly exchanged for volume through collection.
Profit forecasting and investment advice. Net profit due to mother from 2024 to 2026 is expected to be 0.23, 0.26, and 0.3 billion yuan, respectively, maintaining a “buy” rating.
Risk warning: Product prices may drop drastically, and blood purification capacity releases fall short of expectations.