The 2020 performance is in line with our expectations.
The company announced its 2020 results: revenue 104 million yuan, an increase of 383.4% over the same period last year; a net loss of 398 million yuan before adjustment, an increase of 175.5% over the same period last year; and an adjusted loss of 98.94 million yuan, a year-on-year reduction of 26.9%, which is in line with our expectations.
Development trend
The growth on the income side is in line with expectations, and the net loss after deduction continues to narrow. The company achieved 104 million yuan in revenue in 2020, all from the sales of VitaFlowTM products. The company's pre-adjustment loss increased by 175.5% compared with the same period last year, mainly due to an increase in financing costs of about 145 million yuan due to the issuance of round C and D-round preferred shares, as well as changes in the fair value of financial instruments and listing-related expenses; after deducting non-recurrent items, the adjusted net loss was about 98.94 million yuan, narrowing 26.9 percent year-on-year. We expect that with the completion of the listing of the company and the steady development of various operations, we are expected to make a profit in 2022 in the future. In addition, according to the company's guidelines, management expects the gross profit margin to rise to 60% in 2021, further narrowing the loss.
The sales volume of VitaFlowTM continues to make efforts, and the second generation products can be put on the market. By the end of 2020, the sales volume of the company's core product VitaFlowTM reached 1293 sets (an increase of 383.4% over the same period in 2019), with a unit price of about 80400 yuan.
At the same time, according to the company announcement, the company has submitted the listing application of the second generation TAVI product VitaFlowTM II to the State Drug Administration in October 2020, and the company is expected to complete the registration by the end of 2021; the company is also conducting confirmatory clinical trials of VitaFlowTM II in Europe, and plans to submit the CE label registration application in 2021. In addition, according to the company's guidelines, management expects the sales of TAVI products to reach a record high during the 1Q2021 period, with an increase of about 25% over 4Q20, and expects to complete sales of about 3700 sets of VitaFlow series products in 2021, with a 41% market share of TAVI products.
Positioning to build a domestic comprehensive cardiac valve interventional therapy platform, product pipeline layout is competitive. We believe that Xintong Medical is at the forefront of the market in the development and commercialization of innovative treatment solutions, and with its comprehensive and innovative product portfolio and pricing strategy, it is expected to provide patients with more choices in the treatment of valvular heart diseases. In addition to a variety of aortic valve products, the company's R & D pipeline has also laid out a number of related products for valve replacement and repair in the field of bicuspid / tricuspid valve, the overall technical path is more comprehensive, and the product pipeline is highly competitive.
Profit forecast and valuation
We keep the company's revenue forecast of 304 million yuan / 621 million yuan in 2022 and the net loss of 106 million yuan and net profit of 64 million yuan in 2022. Taking into account the steady progress in the volume of the company's product terminals, we maintain the company's target price of HK $18.42 in 2021 (based on DCF valuation), with upside space of 30.8%.
Risk
Product research and development failure risk; industry competition aggravates competition risk; industry policy risk.