Matters:
The company released its 2024 mid-year report, with operating income of 0.122 billion yuan (+42.39%), net profit to mother 0.032 billion yuan (+172.38%), after deducting non-net profit of 0.028 billion yuan (+193.89%). 24Q2, operating income 0.065 billion yuan (+57.27%), net profit to mother 0.017 billion yuan (+328.11%), after deducting non-net profit of 0.016 billion yuan (+426.60%).
Commentary:
The dura mater, craniomaxillofacial repair, and fixed plates maintained a high growth rate. 24H1's dural revenue was 0.069 billion yuan, up 36.68% year over year. In 2023, the company successively won bids/renewals for its meningeal products in Anhui Province, Jiangsu Province, Liaoning Interprovincial Alliance, Shaanxi Interprovincial Alliance, etc., and the market penetration rate continued to increase. Revenue from 24H1 craniomaxillofacial repair and fixation systems was 0.035 billion yuan, an increase of 32.79% over the previous year. In 2023, the company's products were selected for collection by the Henan Interprovincial Alliance. The penetration rate of PEEK materials accelerated under the impetus of collection.
New products are quickly released. 24H1's total revenue of absorbable regenerated cellulose oxide and dural medical glue was 0.014 billion yuan, an increase of 145.00% over the previous year. Among them, more than 0.08 million tablets have been clinically used to absorb regenerated cellulose oxide at home and abroad. The company broke the import monopoly and was selected for the Inner Mongolia Interprovincial Alliance for hemostatic material collection in 2023. Currently, the company is planning to expand the indications of products that can absorb regenerated cellulose oxide to hemostasis, so as to compete with imported brands in all fields of surgery. The company's dural medical adhesive products can effectively improve medical quality, are in line with clinical trends, and the market capacity is expected to continue to expand.
The international business continues to expand. 24H1's overseas revenue was 0.025 billion yuan, up 25.71% year on year, and overseas business continued to grow rapidly. The main products are sold overseas, and the dura mater is still the main source of revenue. Currently, the company's products cover nearly 90 countries and regions, including Europe, South America, Asia, and Africa.
Gross margin declined slightly due to the impact of collection, and cost optimization led to increased profitability. At 24H1, the company's overall gross margin was 78.85% (-0.98pct), which was a slight decrease, mainly due to a year-on-year decrease of 8.77pct to 59.57% of the gross margin of craniofacial repair and fixation systems. It is expected that due to collection and landing, the gross margin of dura mater and absorbable regenerated cellulose oxide and dural membrane medical glue will increase. 24H1 has a sales expense ratio of 18.66% (-8.82pct), a management expense ratio of 24.34% (+1.13pct), and a R&D expense ratio of 9.06% (-4.96pct). The optimization of the overall expense ratio led to an increase of 12.67 pct to 26.54% in the company's net interest rate to mother.
The 24-year equity incentive plan shows confidence in development. Following the 23-year incentive plan, the company launched a 24-year incentive plan to further motivate employees. The 24-year incentive plan's performance assessment target of 100% company-level ownership is: based on 23 years, the 24-26 revenue growth rate is not less than 23%, 61%, and 103%, that is, no less than 0.284, 0.372, and 0.469 billion yuan, which shows confidence in growth.
Investment advice. Based on the interim report results, we maintain our profit forecast. The company's net profit for 2024-2026 is 0.06, 0.08, and 0.12 billion yuan, respectively, up 49.1%, 38.1%, and 45.5% year-on-year. The corresponding EPS is 0.92, 1.27, and 1.85 yuan, respectively, giving the company a valuation of 55 times in 2024, corresponding to a target price of about 51 yuan, maintaining a “recommended” rating.
Risk warning: 1. Price reduction exceeds expectations; 2. Post-harvesting volume falls short of expectations; 3. Promotion of new products falls short of expectations.