Incidents: 1) The company recently released its 2020 annual report, with annual revenue of 160 million yuan (-5.5%), net profit of 35.95 million yuan (-16.8%), net profit of non-attributable income of 27.66 million yuan (-29.1%), net operating cash flow of 42.08 million yuan (+20.9%); 2) The company released its 2021 quarterly report, with Q1 revenue of 45.83 million yuan (+50.1%), net profit of 12.94 million yuan (+115.4%), net profit of 10.94 million yuan (+107.5%), net profit of non-attributable mother of 10.49 million yuan (+107.5%), net profit of non-attributable income of 10.49 million yuan (+107.5%), net profit of non-attributable mother of RMB 10.49 million (+107.5%), net profit of non-attributable income of RMB 10.49 million (+107.5%), net profit of non-attributable income of RMB 10.49 million (+107.5%), net profit of non-attributable income of RMB 10.49 million (+107.5%), net profit of RMB 10.49 million (+107.camp Net cash flow was $14.81 million (+773.3%).
Domestic recovery drives quarterly improvements in performance, and IPO expenses affect short-term profitability. 1) Q4 performance returned to growth. On a quarterly basis, revenue growth rates for the single quarter of 2020 Q3/Q4 were -1.8% and 6.6%, respectively, and the net profit growth rate for homogenous income was -25.6% and 20%, respectively. The obvious recovery in the fourth quarter was mainly due to domestic business recovery and continuous performance growth. The gross profit margin in 2020 was 58.3% (-1.7pp), and the total four rates were 38% (+5.1 pp), mainly due to management expenses and increased R&D expenses by 4.5pp and 1.2pp, respectively. The R&D expenditure rate was 9.4%, and the company further increased R&D investment in 2020. The above factors put pressure on profitability in the short term. 2) 2021Q1 revenue and net profit to parent increased by 35.3% and 72.1%, respectively, compared to 2019Q1. The company's various businesses achieved a good recovery during the post-pandemic period.
Endoscopic staplers bucked the trend and led the rise, and the domestic market took the lead in recovering. 1) By business, in 2020, endoscopic stapler revenue was 90.74 million yuan (+33.2%), bucking the trend and becoming the company's largest business, with a gross profit rate of 53.7% (+1.44pp). Benefiting from the trend of minimally invasive surgery, the company's business is expected to grow rapidly; revenue from tubular staplers is 54.79 million yuan (-32.7%), and gross profit margin is 69.2% (-1.3pp) due to the decline in surgery volume due to the epidemic; linear cutting stapler revenue is 12.69 million yuan (-33.4%), gross profit rate 40.572% (+0.572%); purse stapler 273 10,000 yuan (+20.6%), linear suture stapler 2.4 million yuan (+29%); 2) Looking at the subregion, domestic sales revenue was 120 million yuan (+15.2%) and export business revenue was 45.5 million yuan (-37.7%). The domestic market took the lead in recovering, and overseas markets continued to be affected by the epidemic.
The “MWS+MVP+PK” model promotes efficient R&D, and the “demand+policy” dual drive stapler market growth. The company focuses on innovative technology accumulation. It uses a “clinical demand, internal competition, and rapid iteration” R&D model. By combining MWS (engineer/surgeon meeting) and MVP (minimum viable product), the company uses a unique PK mechanism to improve R&D efficiency, stimulate the innovation vitality of R&D personnel, and ensure product originality and technological advancement. The size of China's stapler market in 2019 was 9.48 billion yuan, and is expected to reach 19.06 billion yuan (CAGR = 15%) in 2024. From the industry demand side, as the population ages, people's demand for corrective treatment of non-communicable diseases and medical institutions for surgical diagnosis and treatment equipment will continue to increase; from a policy perspective, hierarchical diagnosis and treatment will drive grass-roots surgical release, promote the sinking of the stapler market, and medical insurance coverage encourages the import and replacement of high-performance medical devices. As one of the leading domestic stapler companies, the company has accumulated domestic and foreign power. It is expected that the market share will gradually increase in the future.
Profit forecasts and investment recommendations. As one of the leading domestic staplers, the company is expected to continue to recover during the post-pandemic period. It is expected that the net profit from 2021 to 2023 will be 0.53, 0.78, and 114 million yuan respectively. The corresponding EPS will be 0.67, 0.97, and 1.43 yuan respectively, and the corresponding PE will be 42, 29, and 19 times, maintaining “purchases”
ratings.
Risk warning: R&D failure risk, outsourcing risk, policy risk.