Introduction to this report:
Nephrology and hepatology-related products are expected to resume rapid growth after the pandemic. Critical care products and blood purification equipment will contribute significant increases. Marketing changes and upgrades will lay the foundation for subsequent growth and maintain the rating for increased holdings.
Key points of investment:
Maintain the increase in holdings rating. Considering the impact of the company's operations and marketing management changes and upgrades, the 2023-2024 EPS forecast was lowered to 1.43/1.81 yuan (originally 2.09/2.74 yuan), and the 2025 EPS forecast was 2.30 yuan. Referring to comparable company valuations, the 2023 PE 25 X was given, and the target price was lowered to 35.75 yuan to maintain the increase in holdings rating.
The performance was in line with expectations. The company achieved revenue of 2,491 million yuan (-6.88%) in 2022, net profit of 890 million yuan (-25.67%), net profit of 822 million yuan (-27.65%) after deducting non-net profit of 822 million yuan (-27.65%), gross margin decreased by 2.64 pct year-on-year, and sales and R&D expenses increased 5.75 pct/3.70 pct respectively, resulting in profit growth lower than revenue growth. The performance was below the previously forecast range and was in line with expectations.
Critical care products and equipment are growing rapidly. Sales revenue of nephrology and hepatology-related products declined markedly year-on-year in '22, and rapid growth is expected to resume after the epidemic. Critical care products made a breakthrough, with domestic sales revenue of 229 million yuan (+32.47%); actively seizing new infrastructure opportunities, blood purification equipment revenue of 198 million yuan (+163.18%); overseas revenue of 62.49 million yuan (-51%), mainly affected by a decrease in the number of critically ill patients and difficulties in overseas promotion activities. As marketing resumes and localization progresses, the future can be expected.
Marketing changes have been upgraded, and a new round of incentives shows long-term confidence. In '22, the company's marketing team took the initiative to transform, comprehensively upgrade the organizational structure, establish a provincial and regional responsibility system, achieve flat management, reduce administration, optimize resource investment, change assessment incentives, focus on use, remove inventory, and continuously promote the professional transformation of the sales team, laying the foundation for subsequent growth. In March '23, the company launched a new employee stock ownership plan, which mainly covers the core members of the marketing team. The performance assessment index is 36.7 billion yuan in net profit for 23-25/27. The assessment period of 3-5 years stimulates the team and is expected to maintain talent stability at the same time, demonstrating long-term confidence.
Risk warning: Product entry and sales are lower than expected, and the progress of new product development is lower than expected.