Incidents:
Huakang Medical recently released a report for the first quarter of 2023 and 2024: in 2023, the company achieved revenue of 1.60 billion yuan (+34.7%), mainly from medical purification system integration business and medical consumables sales; net profit of 110 million yuan (+4.7%) to mother, net profit of 908.44 million (+1.4%) after deducting non-return to mother. In 2024Q1, the company achieved revenue of 230 million yuan (-4.4%), net profit without return to mother of 32.072 million (-85.3%), and net profit after deduction of 33.397 million (-48.2%). Losses were mainly due to the company's rapid development in 2023, with significant personnel growth. The growth in sales staff and technical support personnel led to order growth, but there was still a delay in order conversion to output value; the increase in the company's operating costs.
The core business, the medical purification integration business, is still growing rapidly, and expenses have increased by product: medical purification system integration revenue of 1.35 billion yuan (+36.8%), medical equipment sales of 91.406 million (+125.1%), medical consumables sales of 130 million (-4.3%), and operation and maintenance services of 17.44 million (+37.2%). On the cost side, sales expenses in 2023 increased 61.4% year over year, sales expenses increased by 11.3%, management expenses increased 17.4% year over year, and management expenses ratio 9.2%, mainly due to increased sales expenses and management personnel due to increased business scale; R&D expenses increased 40.8% year on year, and R&D expenses rate 4.8%, mainly due to increased R&D investment.
Focusing on the two main and three victories, the laboratory business continued to make great breakthroughs. The company consolidated its strategic strength and made every effort to promote steady development. The total bid amount exceeded 2 billion dollars in 2023; under the guidance of the “two main and three pairs” strategic layout, it created many benchmark cases such as Zhejiang University First Medical School, Sichuan Huaxi, Shandong Qilu, Shenzhen ****, etc., and won heavyweight awards such as the “China Construction Engineering Luban Award” and “China Construction Engineering Decoration Award”, and set up a reputation banner in the national market. A base for on-site observation of academic exchanges. By the end of 2023, the company had successfully delivered a total of 37 projects; there were 2.21 billion on-hand orders, mainly medical purification integrated business orders, of which: 1.59 billion for medical special orders; 420 million for laboratory orders.
Investment advice and profit forecasting
Since mid-2021, under the premise of continuous project completion, the company's on-hand orders have remained high. By the end of 2023, the company had 2.21 billion on-hand orders. Adequate on-hand orders guarantee the company's performance growth. The company's 2024-2026 revenue is expected to be 20.88/26.16/32.27 billion, with growth rates of 30.40%/25.28%/23.34%, respectively; net profit to mother of 1.58/2.10/284 million, growth rates of 46.86%/33.22%/35.16%, respectively; EPS is 1.49/1.99/2.69 yuan/share, corresponding PE is 13.57/10.19/7.54. Maintain a “buy” rating.
Risk warning
Industry competition increases risks, risks such as the risk that major business qualifications cannot be renewed, the risk of uncertainty about new orders, accounts receivable repayment issues, and the promotion of winning projects.