Main points of investment:

The performance slightly exceeded expectations, and Wei held an increased rating. The company achieved an income of 1.587 billion yuan in 2020, an increase of 26.21% over the same period last year, a net profit of 606 million yuan, an increase of 30.12% over the same period last year, and a non-return net profit of 553 million yuan, an increase of 30.78% over the same period last year. Maintain the 2021-2022 forecast EPS 1.84 EPS2.89 2.31 yuan, increase the 2023 forecast EPS2.89 yuan, maintain the target price 82.80 yuan, corresponding to 2021 PE 45X, maintain the overweight rating.

The core business is growing steadily, and the operating strength of the company is highlighted under the epidemic. In 2020, the company's trauma income was 981 million yuan (+ 23.06%); spinal income was 369 million yuan (+ 39.31%); minimally invasive surgery income was 111 million yuan (+ 21.69%); neurosurgery income was 38.13 million yuan (+ 10.64%). The gross profit margin of trauma and spinal products increased slightly. From a regional perspective, domestic income accounted for 97.22% of the total income, an increase of 28.77% over the same period last year, while overseas income was affected by the epidemic, down 25.54% from the same period last year.

Quarterly earnings growth slightly exceeded expectations. The company also released its quarterly report for 2021, with revenue of 375 million yuan, an increase of 62.84% over the same period last year, a compound growth rate of 33.3% on the basis of 2019, a net profit of 131 million yuan, an increase of 46.39% over the same period last year, and a non-return net profit of 124 million yuan, an increase of 80.43% over the same period last year. The profit growth rate is much higher than the income growth rate, mainly due to the small amount of income under the 2020Q1 epidemic, while the expenditure is rigid, the net interest rate is low, and the 2021Q1 performance is slightly higher than expected.

Equity incentives to mobilize the enthusiasm of employees, multi-product leader is expected to steady growth. The company has launched a restricted stock incentive plan, which is conducive to arousing the enthusiasm of employees. With volume procurement is expected to increase the concentration of the orthopaedic industry, the leader is more dominant, the rate of price decline is still waiting for the policy landing. The company is actively expanding dentistry, minimally invasive surgery, orthopedic joints and other fields, and gradually become a high-value consumables platform company, which is expected to maintain steady growth.

Risk tips: business development is not as expected, product price reduction risk, product volume is not as expected