Main points of investment
The renewal rules of trauma set are mild, and the price of the product may be raised: on September 18, the Beijing-Tianjin-Hebei Medicine Joint Purchasing platform issued the "Interprovincial Alliance announcement on centralized Volume Purchasing of Orthopaedic Trauma Medical consumables". The rules for bid renewal are relatively mild, and the setting of the highest effective quotation is higher than that in the past, which may bring flexibility for the trauma business of some orthopedic consumables enterprises. Dabo medical trauma business contributed mainly revenue. 2023H1 achieved revenue of 750 million yuan (- 9%, year-on-year growth, the same below), net profit of 94 million yuan (- 48%), and net profit of 65 million yuan (- 55%). 2023Q2 realized income of 358 million yuan (- 10%), net profit of 35 million yuan (- 49%) and net profit of 18 million yuan (- 63%) in a single quarter. Affected by the price reduction of collective mining, the gross margin of the company's main products has declined, which has a certain impact on the company's short-term revenue and profits.
With the help of concentrated mining, we can increase the coverage of products, and the extension layout increases new profit growth points. After the collection of orthopedic trauma and spinal consumables was implemented, the terminal price of the company's products dropped significantly, 2023H1 orthopedic trauma gross profit margin dropped to 61.86%, revenue decreased by 35% compared with the same period last year; orthopedic spinal gross profit margin dropped to 83.87%, revenue decreased by 11% compared with the same period last year, and the company's performance is partially under pressure. It is expected to take advantage of the opportunity of collection to increase the coverage of medical institutions and increase product sales by obtaining more surgeries. The company's joint products account for a slightly lower proportion of revenue, and it is expected to increase the market share by collecting accelerated import substitution. 2023H1 joint products achieve revenue of 58.27 million yuan (+ 104%).
Under the normalization of collection and acquisition, the company increases innovative research and development, expands subdivision fields such as neurosurgery, minimally invasive surgery and dentistry, enriches product layout, and increases new revenue growth points. 2023H1 minimally invasive surgery products achieved revenue of 122 million (+ 28%); neurosurgery products achieved revenue of 30 million yuan (+ 55%), maintaining a good growth momentum.
Strengthen the international layout and provide the driving force for growth. The company's products have been exported to more than 60 countries and regions, such as Australia, Russia, Ukraine, Chile, etc., and the proportion of overseas business revenue has increased year by year. 2023H1's overseas business has achieved operating income of 74.35 million yuan (+ 101%). The company will continue to distribute overseas markets, accelerate the international business process, improve the ability of global operation, and provide the company with extensional growth power.
Investment suggestion: it is estimated that the company's net return profit from 2023 to 2025 will be RMB 357 million, with a growth rate of 107%, 88% and 51%, respectively, and the corresponding PE will be multiple of 70-38-25. Considering that the renewal price of the company's trauma products is expected to increase, spine and joint products are expected to increase terminal coverage, epitaxial neurosurgery and other subdivided areas, and increase the layout of overseas business, which is expected to lead the company's business to resume growth. For the first time, it was given a "overweight-A" rating.
Risk hint: product sales are less than expected risk, overseas market development is not as expected risk, concentrated with volume procurement risk.