Incidents:

The company released its 2024 semi-annual report. In the first half of 2024, it achieved operating income of 0.122 billion yuan, a year-on-year increase of 42.39%, and net profit to mother of 32.39 million yuan, an increase of 172.38% year-on-year. After deducting non-return net profit of 27.68 million yuan, a year-on-year increase of 193.89%. The second quarter achieved revenue of 64.84 million yuan in a single quarter, up 57.27% year on year. Net profit to mother was 17.45 million yuan, up 328.11% year on year, after deducting net profit of 15.6 million yuan without return to mother, an increase of 426.60% year on year.

Comment:

Main business improved significantly, and multi-provincial procurement accelerated market expansion

The 2024H1 artificial hard brain (spine) membrane patch achieved revenue of 69.12 million yuan, an increase of 36.68% over the previous year. The company successively won bids/renewed contracts in Anhui Province, Jiangsu Province, and the Liaoning Interprovincial Alliance last year, and the company's product penetration rate continued to increase. The craniomaxillofacial repair and fixation system achieved revenue of 35.49 million yuan, an increase of 32.79% over the previous year. The company established a standardized team assistance service model, which formed a stable customer stickiness and a high technical and service threshold. The company's products were selected for procurement by the Henan Provincial Alliance in November 2023. Absorbable regenerated cellulose oxide and dural medical glue achieved operating income of 14.21 million yuan, an increase of 145.00% over the previous year. The company's hemostatic products were shortlisted for purchase by the Inner Mongolia Interprovincial Alliance in December 2023, and the company actively participated in the bidding process for dura mater medical glue.

The company's expense ratio continues to be optimized, and overseas business is growing steadily

The 2024H1 company's cost rate for the period was 51.94%, down 12.83 percentage points from the previous year, of which the sales expense ratio was 18.66%, down 8.82 percentage points; the management expense ratio was 24.34%, up 1.13 percentage points from the previous year, mainly due to the increase in 2024H1 equity incentive expenses; the R&D expense ratio was 9.06%, down 4.96 percentage points year on year, mainly due to the impact of the progress of the R&D cycle, and the higher clinical expenses of the 2023H1 R&D project; the financial expense ratio was -0.12%. The company achieved overseas sales revenue of 25.41 million yuan, an increase of 25.71% over the previous year. Among them, artificial hard brain (spine) membrane patches are still the main source of international revenue.

The product expansion and adaptation work is about to be completed. Equity incentives drive the company to actively plan the expansion of indications for absorbable regenerated cellulose oxide products. It is expected to be completed by the end of 2024. Its smooth industrialization is expected to rapidly increase the company's hemostatic materials market penetration rate and compete with imported brands in all surgical fields. In 2024, the company launched a new equity incentive plan. It plans to grant 0.576 million restricted shares to 28 targets, effectively enhancing the cohesion of the core team.

Profit forecast: We expect the company's revenue for 2024-2026 to be 0.301/0.382/0.49 billion yuan (previous revenue for 2024-2025 was 0.288/0.377 billion yuan, respectively), and net profit to mother of 0.068/0.106/0.122 billion yuan (previous revenue for 2024-2025 was 0.068/0.105 billion yuan, respectively). The reason for the increase is that all major businesses maintain a high growth rate and new products Continue to volume and maintain a “buy” rating.

Risk warning: the risk of new product development and technology iteration, the risk of policy changes, the risk of terminal hospital market expansion, the risk of increased market competition