Lexin Medical released its annual report. Revenue reached a record high, and overall profits were under pressure of Lexin's revenue of 1.82 billion yuan in '21 (YoY: +36.2%); Guimu's net profit was 8.87 million yuan (YoY: -87.4%), in line with previous forecasts. In 2021, the company's various business lines and overall sales achieved relatively rapid growth, and revenue reached a record high; the main reasons for the decline in profit were: 1) production costs rose sharply due to lack of chips, rising raw material prices, energy shortages and poor global logistics; 2) the company's overseas business revenue accounted for 63.3%, and the appreciation of RMB had a great impact on profits; 3) R&D investment increased sharply year-on-year. Looking ahead to 2022, we are optimistic that the company will seize the development opportunities of healthcare IoT and digital medical gold and maintain steady revenue growth. At the same time, net profit is expected to rebound from the bottom with external disturbances eliminated, costs reduced and increased efficiency, and product structure optimization. We forecast that the company's EPS for 22-24 will be 0.54/0.87/0.97 yuan. Considering that it will take some time for the company's strategic transformation and profit recovery, the stability of the profit growth rate is relatively weak compared to industry leaders. Based on the 23-year valuation, Lexin was given 17.1x PE (comparable average expected average value of the company Wind: 17.6x), maintaining the target price of 14.91 yuan and maintaining the purchase rating.
The revenue of the smart wearable business doubled in 2021. Focus on the revenue side of the company's profitability recovery in 2022. The company's various business revenue grew steadily in '21. Among them, smart wearables achieved double growth driven by demand from large customers; on the profit side, due to rising raw materials and logistics costs, the gross margin of all businesses declined, and the overall gross margin was -6.5 pp year-on-year. By business, household medical product revenue in '21 was 760 million yuan (YoY: +10.4%), and gross margin fell 5.4 pp year on year; smart wearable product revenue was 7.2 billion yuan (YoY: +102.6%), gross margin fell 5.8 pp year on year; household health product revenue was 350 million yuan (YoY: +21.5%), and gross margin fell 3.5pp year on year. The company is expected to optimize its customer and product structure and improve profitability through internal operating efficiency and strategic focus in '22.
“Health IoT+ Digital Health Service” is two-wheel-driven, optimistic about the company's long-term growth potential. The golden decade of health IoT and digital medicine has arrived, fueled by the increasing aging of the global population, the spread of the epidemic, and the introduction of the “Health China 2030 Plan Outline” and “14th Five-Year Plan” of the “14th Five-Year Plan”. According to the annual report, Lexin adheres to the “Health IoT+ Digital Health Service” two-wheel drive and has gradually improved its industrial layout. In terms of health IoT, the company has a comprehensive multi-dimensional sign testing product line. Among them, medical-grade health watches, electronic blood pressure monitors, fat meters, and stickers have been certified as Class II medical devices; it has established long-term stable partnerships with giants such as Weilun, Withings, Braun, and Philips. Currently, demand for telemedicine from overseas is strong, and Lexin will strategically focus its remote health management business (RPM) on providing health management equipment to leading overseas customers. We believe it will help the company increase its market share and profit margin.
Maintain the target price of 14.91 yuan and maintain the buying rating
We are optimistic about the company's long-term growth prospects in the health IoT and digital medical circuit. However, considering that factors such as the current shortage of chips, the epidemic, and rising costs continue, the forecast for Fumo's net profit in '22 was lowered to 116 million yuan (previous value: 134 million). With the implementation of measures such as optimizing the business portfolio, strengthening control, and promoting modularization, the company's profit is expected to gradually recover in the medium to long term, giving a net profit forecast of 186/207 million yuan for 23/24. The company was given 17.1 times PE for 23 years, maintained the target price of 14.91 yuan, and maintained the purchase rating.
Risk warning: Competition in the health IoT market is intensifying; the pandemic has caused the risk of a decline in global 3C demand.