Report summary
Relying on self-developed in vitro biomimetic mineralization technology, the leading company to build a gold circuit for bone repair was founded in 2004 and launched mineralized collagen bionic bone repair material medical device products in 2011. Its bionic synthesis process is close to the mineralization process of natural human bone, and through its in vitro bionic mineralization technology, type I collagen and hydroxyapatite can be arranged in an orderly manner, thus forming artificial bone repair materials whose main components and microstructure are similar to natural human bone.
Thanks to the wide range of sources, biocompatibility, biodegradability, bone conduction ability, osteogenesis induction ability, plasticity and other competitive advantages of mineralized collagen artificial bone repair materials, sales revenue of related products grew strongly: in 2017-2020, the company's operating income CAGR was about 26%, and the net profit of returning mother CAGR was about 56%, ROE increased year by year, reaching 14% in 2020.
Orthopedics: Demand drives the development of the industry, compounded by an increase in the proportion of artificial bone repair materials, and “bone gold/Bongold” has great potential for development at home and abroad
There is strong demand for bone defect repair materials in orthopedic clinics in China, and there is a huge gap in clinical demand that needs to be filled. In 2018, the market size of China's orthopedic bone defect repair materials industry was 2 billion yuan, and the South expects CAGR to reach 22.7% in 2018-2023.
In 2018, artificial bone repair materials already accounted for about 1/3 of the market share of China's orthopedic bone defect repair materials industry, with Aojing Medical accounting for about 13% of artificial bone repair materials. As demand for clinical applications increases, the sources of allogeneic bone are limited and there are legal and ethical issues that make it difficult to meet the needs of large-scale clinical applications; and the technical level and clinical effects of artificial bone repair materials continue to improve, it is expected that the market share of artificial bone repair materials will further increase.
In 2020, the company's orthopedic products achieved sales revenue of 128 million yuan, of which “Bone Gold” reached 127 million yuan, an increase of 25.13% over the previous year, accounting for 69.30% of revenue; “BongGold” was 950,000 yuan, a year-on-year decline of 67.912 due to the impact of the epidemic, accounting for 0.52% of revenue. Based on the replacement of autologic bone/natural bone/artificial bone metal materials by the company's orthopedic products, we expect the company's orthopedic product sales revenue CAGR to reach 25%-30% in the next 3 years.
Stomatology/Orthopedics: Potential demand for dental implants is high, the market share of Gaelic bone implants is 70%, the “tooth” base is small, the space is large, and the growth rate is high
The number of dental implants in China is growing rapidly. The CAGR in 2011-2018 exceeded 50%. The increase in the number of dental implants will directly drive the expansion of the market size of the dental bone implant materials industry. The market size of the domestic dental bone implant materials industry in 2018 was 1.05 billion yuan, and the South expects an average compound annual growth rate of 19.9% from 2018 to 2023.
Swiss Gaishi's Bio-Oss bone powder and Bio-Gide biodegradable collagen film series products account for about 70% of the market share of China's dental bone implant materials industry, and the market share of domestic products is only 15%. In 2019, Aojing Medical's products accounted for about 16% of its Chinese product brands. High-quality domestic brands are expected to gradually replace foreign brands with higher cost performance advantages as development highlights.
In 2020, the company's “dental” products achieved sales revenue of 12.81 million yuan. Due to the impact of the epidemic, the year-on-year decline was 56.7%, accounting for 6.97% of revenue. “Tooth” sales revenue base is small and there is plenty of room. We expect to achieve an annualized compound growth rate of 30%-35% in the next 3 years.
Neurosurgery: Demand is rising, and “Kara Rui” is in the process of iterating on metal materials & foreign-funded products
Based on the increasing incidence of diseases requiring craniotomy or directly causing skull defects, such as malignant brain tumors, nasopharyngeal tumors, skull fractures, intracranial injuries, etc., China's skull defect repair materials industry is developing rapidly. The market size of China's skull defect repair materials industry in 2018 was 860 million yuan, and the South expects a compound growth rate of 15.3% from 2018 to 2023.
Since metal materials such as titanium alloys and titanium nets have disadvantages such as being easily affected by temperature and may cause discomfort in patients, and because they can easily produce artifacts during medical imaging tests, other materials such as polymer materials and composites are developed rapidly. At the same time, the degree of market import substitution is low. With the continuous strengthening of the overall strength of domestic enterprises and strong support from national policies, domestic products are expected to gradually expand their market share in the future. In 2019, Aojing Medical's products accounted for about 3% of the market.
In 2020, the company's neurosurgical product “KURUI” achieved sales revenue of 42.66 million yuan, an increase of 24.97% over the previous year, accounting for 23.21% of revenue. We expect the company's “Skull Rui” products to achieve an annualized compound growth rate of 25%-30% in the next 3 years.
Investment advice
We expect the company's revenue for 21/22/23 to be 271/3.53/459 million yuan, respectively, and net profit of 122/164/221 million yuan respectively, corresponding to current PE 126/94/70 times, respectively. The first coverage gave an “increase in holdings” rating.
Risk warning
The risk that the continuous implementation of the volume procurement policy affects production and operation activities; the risk that the actual controller's shareholding ratio is low; the risk that procurement of major raw materials is concentrated; the risk that large R&D expenses and sales expenses will be incurred after the implementation of fund-raising projects, which may affect the company's short-term business performance.