The company's recent situation

We recently had discussions with Peijia Healthcare's management. Since 2H24, the company's valve business has maintained a good growth trend; multiple collections of neurological interventions have occurred one after another. We've updated our review as follows:

reviews

TAVR implants may increase by 35-40% throughout 2024. According to monthly tracking and estimates, we expect the number of TAVR (transcatheter aortic valve replacement) surgeries to reach 3,400-3,500 in 2024, an increase of 35-40% over the same period, which is basically in line with our expectations. Since 2024, Henan 1 and Beijing 2 provinces and cities have successively included TAVR in medical insurance reimbursement, and payment issues have continued to improve.

The valve is progressing smoothly in the research pipeline, and a comprehensive plan may gradually take shape. Since 2024, the company's valve pipeline has made many advances: 1) 2.5-generation TAVR has been approved for marketing, further enriching the existing registration matrix; 2) reflux TAVR (Trio), dry valve TAVR (NXT), and GeminiOne mitral valve repair clip have each completed multi-center registration clinical enrollment. We anticipate that these three products may be approved for sale at the end of 2025 or the first half of 2026. We expect that by 2026, the company may have ~6 TAVR registration certificates and commercialized mitral valve repair products in the Chinese market. We believe that the rich product matrix will help cope with subsequent changes in the competitive landscape, and the company may be expected to continue to maintain its position as a leading company in the valve market.

Neural intervention has maintained a good trend, and domestic alternatives are in the future. We expect revenue from neurological intervention to be +35-40% to around 0.35 billion yuan in 2024, with rapid release of products such as spring rings, embolization stents, microguide wires, and conveying balloon expansion catheters. Since 2024, Hebei 3 and Anhui Health Insurance Administration 4 have successively organized multiple rounds of neurological intervention collection. We expect to basically cover all major neurologic treatment products by mid-2025. We believe that leading domestic companies such as Peijia Medical are expected to continue to increase their share. In August 2024, the company and Nuanyang Medical reached an exclusive distribution agreement with Nuanyang Medical 5. The product is in the registration and approval stage of the State Drug Administration.

Profit forecasting and valuation

We have kept our outperforming industry ratings and 2024/25 earnings forecast largely unchanged. Based on optimism about subsequent new valve products and domestic replacement trends, the DCF target price (WACC = 11.2%, sustainable growth rate 0.5%) was raised by 25% to HK$5, with room for a 25% increase from the current price.

risks

The growth rate of the industry fell short of expectations, the price reduction of collection exceeded expectations, research and development failed, and the promotion of new products fell short of expectations.