Core views

Focus on neurosurgery and fully cover high-value consumables. The company was founded in Guangzhou in September 2008. It is the only company in the field of neurosurgery in China that also has implantable medical device products such as artificial hard brain (spine) membrane patches, craniomaxillofacial repair and fixation systems, absorbable regenerated cellulose, and dura mater medical glue, covering the key implantable medical devices required for craniotomy surgery. As of December 31, 2023, the company has been approved to register 10 Class III medical device products and 1 Class II medical device product registration certificate in China. The company's revenue grew steadily and the profit side gradually improved. In 2023, it achieved revenue of 0.231 billion yuan, an increase of 18% over the previous year, and net profit to mother of 0.041 billion yuan, an increase of 14% over the previous year. Revenue CAGR reached 19.49% in 2019-2023.

The neurosurgery market space is large, and the company's multi-dimensional product matrix is expected to open up the growth ceiling. 1) China's artificial dura mater market has a high degree of localization. With the normalization of harvesting and the rapid development of bioadditive manufacturing technology, the company's market share is expected to increase steadily. 2) The clinical effect of PEEK craniomaxillofacial repair products is superior to titanium materials, and collection is expected to replace them quickly. There are many types of craniomaxillofacial repair materials. Titanium materials are currently widely used clinically. According to data from the Southern Institute, as of 2018, titanium products in China occupied about 93% of the cranial repair market share.

PEEK materials effectively make up for the shortcomings of traditional titanium materials and are in the rapid release stage. In 2017-2019, China's PEEK repair product market was over 80% CAGR. The company's three PEEK products were successfully selected in the Henan 24 Interprovincial Alliance. This collection is expected to further accelerate the penetration rate of PEEK materials in the Shenwai repair market, which is beneficial to the rapid start of the company's PEEK revenue. 3) Hemostatic yarn and meningeal gel were approved for listing and are expected to become the company's second growth curve.

The company's absorbable regenerated cellulose oxide hemostatic products (hemostatic yarn) have been approved for marketing in 21 years. Currently, this field is dominated by strong growth years. The company is actively exploring application scenarios and extending to other fields such as surgery. It is expected to be rapidly released in the future to achieve domestic replacement. The company's hemostatic yarn products successfully won the bid for the Inner Mongolia 14 Inter-Provincial Alliance, which is expected to help the company's products enter the hospital and enhance brand awareness.

The dural medical adhesive independently developed by the company was certified domestically in early 2023. The amount of medical glue used in the US market is about 2.5 times that of meninges, and the domestic market is rapidly becoming popular. Currently, only two domestic companies have been approved, and the market space is broad.

The research pipeline is rich, and the matrix of high-consumption products is becoming more and more complete. At present, the company has established a complete industrialized system for technology research and development, registration and production transformation. The company will continue to be guided by clinical needs, further improve the layout of the industrialized system, and continue to enrich the multi-department product structure. For example, the company is committed to enriching products in the hemostasis field and consolidating and expanding its competitive advantage. Currently, multi-layer filament regenerated cellulose oxide is in clinical trials; absorbable regenerated cellulose oxide hemostatic granules are in the product conversion stage. In the field of dentistry, oral absorbable repair membranes are undergoing clinical trials. Among neurosurgical implantable medical devices, the company has polyether ether ketone intracranial fixation plates in the registration and repair stage, titanium craniomaxillofacial fixation plates, and craniomaxillofacial fixation systems in the registration and inspection stage to further maintain the company's dominant position in the field of neurosurgery.

Investment advice

We expect the company's 2024-2026 revenue to reach 0.291/0.38/0.496 billion yuan, up 26.1/30.6% year on year; net profit to mother will reach 0.058/0.084/0.122 billion yuan respectively, up 41.5/44.7/ 46.2% year on year; corresponding EPS will be 0.88/1.27/1.85 yuan; corresponding PE ratio will be 44/30/21X. The company focuses on the field of high-value neurosurgical consumables. The core product dural membrane patch is expected to increase market share through the implementation of volume procurement policies; PEEK craniomaxillofacial repair products are expected to continue to provide rapid growth in the short to medium term; and the company's new hemostatic yarn and meningeal gel business are expected to be rapidly released, becoming a new growth point for the company. First coverage, giving a “buy” rating.

Risk warning

The price reduction of collection exceeded expectations, the implementation of collection and implementation fell short of expectations, and the promotion of new products fell short of expectations.