Matters:
The company released its 2024 quarterly report. Q1 achieved revenue of 358 million yuan (+25.38%), net profit to mother of 184 million yuan (+47.62%), and net profit of 178 million yuan (+48.91%) after deducting non-return to mother. Profit growth exceeded expectations.
Ping An's point of view:
Core products drive growth, and gross margin increased slightly
The company's core products, Castor, Minos, and peripheral medicine balls, are jointly driving rapid 24Q1 performance growth. As Fontus and Talos have completed admission work in most regions, the release of the latest generation of new products has also begun. The increase in sales share of high value-added products brought the comprehensive gross margin of 76.52% (+0.78pct) during the reporting period.
During the year, the company is also expected to approve various products such as blocking balloons, iliac venous stents, and peripheral filters. Continued product additions and iterations ensure the sustainability of the company's growth.
Profit margins are higher than normal due to factors such as falling expense ratios
The company's gross margin for the 24Q1 quarter was 76.52% (+0.78pct). Mainly due to changes in product structure, high value-added products increased a lot compared to the same period last year. During the reporting period, the company's sales, management, and R&D cost rates were not 7.42% (-1.36pct), 3.52% (-1.10pct), and 6.48% (-6.21pct), respectively. The decline in sales expenses was due to the late pace of product promotion meetings, and it is estimated that sales investment in the next quarter will return to normal levels; there are two reasons for the large decline in R&D expenses: (1) The company optimized R&D teams and projects. (2) More products entered the later stages of R&D, and the capitalization ratio increased. In addition, the company also benefited from financial expenses (interest income) and investment income in the first quarter.
Under the influence of multiple factors, the 24Q1 net profit margin reached 51.07% (+7.81pct). Among them, the effects of factors related to efficiency optimization are somewhat continuous, while other factors are incidental, and this net profit margin will not continue in the next few quarters.
Maintain a “Recommended” rating. Maintain the 2024-2026 profit forecast at EPS of 7.94, 10.06, and 12.74 yuan, and maintain the “recommended” rating.
Risk warning: 1) There is price reduction pressure such as collection of high-value consumables. If the decline exceeds expectations, it may affect the company's growth rate; 2) if the clinical/marketing/bidding results fall short of expectations, it may reduce the company's subsequent growth momentum; 3) If changes in the overseas market environment cause the company to go overseas lower than expected, it may have a negative impact on medium- to long-term performance growth.