Microelectrophysiology released its report for the third quarter of 2024. 2024Q1-Q3 achieved operating income of 0.291 billion yuan, up 23.21% year on year; net profit to mother was 41.73 million yuan, up 262.22% year on year; net profit after deduction was -0.75 million yuan, up 95.69% year on year. 2024Q3 achieved operating income of 92.5 million yuan, down 1.54% year on year; net profit to mother was 24.71 million yuan, up 163.92% year on year; net profit after deduction was -1.67 million yuan, up 67.09% year on year.
Opinion: The short-term decline in Q3 revenue was mainly affected by the change of domestic distributors+delays in revenue confirmation for some overseas projects. The decline in the expense ratio during the period drove the profit-side growth rate to be better than the revenue side. The deduction of unrelated differences was mainly due to the impact of government subsidies. The number of three-dimensional surgeries continues to increase, and the use of pressure catheters is increasing month by month. Overseas performance was even more impressive, and overseas revenue increased by more than 20% in Q3. Sales channels are constantly being improved, research projects are abundant, and domestic electrophysiology leaders have unlimited potential.
Distributor changes+delays in revenue recognition for some projects led to Q3 revenue fluctuations. The profit side growth rate was better than the revenue side mainly due to the improvement in cost rates during the period and the impact of government subsidies. Q3 Revenue fluctuations were mainly affected by the change of distributors in some regions of the country and delays in revenue confirmation for some overseas projects. The company achieved remarkable results in cost reduction and efficiency. The 2024Q3 sales expense ratio was 27.89% (YoY -2.46pct), the management expense ratio was 10.86% (YoY -0.25pct), and the R&D expense ratio was 19.48% (YoY -5.63pct), driving profit side growth rate better than revenue side. The decline in R&D expenses was mainly due to some R&D projects entering the post-clinical stage, and related R&D investment decreased. 2024Q3 received a government subsidy of 21.05 million yuan (2023Q3 was 7.38 million yuan), and the profit and loss from changes in fair value and financial asset disposal income was 5.31 million yuan, resulting in deductions falling short of the parent side.
Overseas markets are being developed at an accelerated pace, and sales channels are constantly being improved. The company continues to explore overseas markets, and 2024Q3's overseas revenue increased by more than 20% year on year. According to the 2024 semi-annual report data, in the domestic market, the company has established stable cooperative relationships with many dealers, and its products have covered more than 1,000 terminal hospitals across the country. Domestic focus is on superior products. Since the launch of TrueForce pressure catheters, nearly 3,000 surgeries have been completed, IceMagic cryoablation products have been connected to the Internet in nearly 30 provinces, and IceMagic multi-channel temperature measurement cryoablation catheters have been used in the first batch of clinical applications after marketing in West China Hospital and other places. In overseas markets, the company has strengthened the establishment of agency channels, and its products have been exported to 36 countries and regions including France, Italy, Spain, Russia and South Korea. TrueForce pressure catheters sold excellently and became the product with the highest sales share in the first half of the year.
The volume of 3D surgeries continues to grow, and abundant research reserves support future development. The number of 3D electrophysiology surgeries at the 2024Q3 company exceeded 6,000, including about 5,000 in China and about 1,000 overseas. The year-on-year increase in the number of Q1-Q3 surgeries overseas was higher than at home. The use of pressure catheters is increasing month by month. The number of Q1-Q3 surgeries in China exceeded 3,000, and overseas cases exceeded 1,000, of which one-third were used to treat atrial fibrillation. The company's research project is progressing smoothly, and the self-developed pulsed electric field ablation catheter has entered the final stage of clinical follow-up; the pulsed electric field ablation project of participating company Shangyang Medical has been submitted for domestic registration and is expected to be approved in the first half of 2025; the renal artery ablation project is undergoing clinical enrollment in many centers; the FlashPoint renal artery radiofrequency ablation system has entered the “green channel”; rich reserves of ongoing research projects are a strong support for long-term rapid development.
Profit forecasting and investment advice. Considering the impact of factors such as changes in the macro environment and industry restructuring, we expect the company's revenue to be 0.429, 0.576, and 0.784 billion yuan respectively, up 30.4%, 34.2%, and 36.0% year on year, respectively; net profit to mother will be 0.03, 0.06, and 0.095 billion yuan, respectively, up 424.1%, 100.6%, and 59.3% year on year; maintaining the “buy” rating.
Risk warning: Sales promotion falls short of expectations, policy risks, new product development falls short of expectations.