Main points of investment

Recently, the company released its annual report for 2020, showing that the company's total income in 2020 was 1.587 billion yuan, an increase of 26.21 percent over the same period last year, and its net profit was 606 million yuan, an increase of 30.12 percent over the same period last year. Among them, the revenue of Q4 in the single quarter of 2020 was 477 million yuan, an increase of 23.22 percent over the same period last year, and the net profit of returning to the mother was 178 million yuan, an increase of 37.34 percent over the same period last year, deducting 167 million yuan of non-return net profit, an increase of 56.07 percent. In addition, according to the company's quarterly report for 2021, Q1 achieved 375 million yuan in revenue in 2021, an increase of 62.84% over the same period last year, and its net profit was 131 million yuan, an increase of 46.39% over the same period last year, deducting an increase of 80.43%.

Profit forecast and rating: the company is a domestic leading enterprise in the field of orthopaedics, with the largest number of registration certificates of three types of medical devices in domestic orthopaedic enterprises, and is one of the few enterprises in the industry with full product line coverage in the field of orthopaedic implant consumables. In the future, the company will be based on orthopaedics, actively expand the business of medical high-value consumables such as minimally invasive surgery, neurosurgery, dentistry and sports medicine, and create a high-value consumables platform company. The reform in the field of high-value medical consumables in China has been continuously promoted, and the pilot project of volume procurement and the implementation of the "two-vote system" of consumables in some provinces have had a far-reaching impact on the development of the high-value consumables industry. As a leading domestic enterprise, the company is expected to benefit from the two-vote system and collection policies in the future to continue to increase market share. We adjust our profit forecast for the company and estimate that the EPS of the company from 2021 to 2023 is 1.89,2.37,2.97 yuan respectively, corresponding to the closing price on April 28, 2021, the PE valuation is 33.9,27.2,21.6 times respectively, maintaining the "prudent overweight" rating.

Risk tips: terminal sales are less than expected risk; risk related to centralized procurement of high-value consumables; R & D progress is not as expected; industry competition intensifies risk; valuation fluctuation risk.