Ping An's point of view:
The company is a leading company in the field of digestive endoscopic diagnosis and treatment equipment and is in a period of rapid development. The company focuses on the field of digestion, and the layout of relevant endoscopic diagnosis and treatment equipment is perfect. The main products can be divided into hemostasis, EMR/ESD, biopsy, ERCP, and diagnostic instruments according to treatment use, and have achieved large-scale sales at home and abroad with excellent product quality and clinical results, forming a high level of market popularity within the industry. The company's performance was impressive. Operating income increased from 122 million yuan in 2018 to 371 million yuan in 2022, and the CAGR was 32.04%. The profit side was even stronger. The company's net profit from the company increased from 37.32 million yuan in 2018 to 145 million yuan in 2022, and the CAGR reached 40.39%. In addition, the company launched an equity incentive plan immediately after listing. The assessment target is that the compound increase in operating income from 2022-2025 is not less than 35%, or the compound increase in net profit from 2022-2025 is not less than 29%, injecting confidence into long-term development.
The long slope of the industry is heavy and snowy, and the increase in penetration rate coexists with domestic production substitution. The medical burden of gastrointestinal tumors is still heavy worldwide, and early gastroscopy can help detect and treat gastrointestinal tumors at an early stage, which can significantly reduce mortality. As the aging population continues to deepen and the penetration rate of endoscopic screening continues to increase, the endoscopic diagnosis and treatment equipment (consumables) market is expected to continue to grow. According to Boston Scientific statistics, the market size of the global endoscopic diagnosis and treatment device industry will increase from 5 billion US dollars in 2021 to 6 billion US dollars in 2024, with a CAGR of 6%; the penetration rate of early stage gastroscopy in China is lower, and the industry is growing faster. The domestic digestive endoscopy diagnosis and treatment device industry market size is expected to grow from 3.73 billion yuan in 2019 to 11.42 billion yuan in 2030, and the CAGR of 12.43% in 2020-2030. Endoscopic diagnosis and treatment equipment involves a variety of procedures, and product demand is rich and diverse. The proportion of minimally invasive treatment procedures such as ESD/EMR and ERCP is expected to continue to rise; domestic enterprises are gradually gaining an advantage in low-end products to break through high-end products to further achieve domestic replacement, and are expected to occupy a certain share of the world.
The product is deeply integrated with clinical needs, and both at home and abroad are driving growth. The company continues to increase investment in R&D, and adheres to the “Three Trees” R&D concept, closely combines innovative technology with clinical needs, and continuously launches new products. As the company's star product, hemostasis clips rely on new detachable functions to quickly gain market share and gradually form multi-generation products. The new generation of replaceable hemostasis clips has lower costs and is expected to drive directly into domestic and international markets; bipolar series products have been recognized by clinicians for their excellent product quality and excellent clinical use results, and are expected to drive rapid release of ESD/EMR products in the first half of 2023. In the first half of 2023, the company's bipolar equipment has been tested in more than 100 hospitals across the country, participating in more than 200 surgeries. Based on excellent product performance, the company has a high level of recognition from domestic and foreign customers, driving growth. The domestic side is expected to continue to increase hospital coverage and strengthen product introduction; the international side is expected to continue to expand new overseas ODM customers, continuously increase the cooperative product line of existing customers, and actively promote the company's own brand sales.
Profit forecasts and investment suggestions:
The company is a leading company in the field of endoscopic medical supplies, with remarkable product and technical advantages. We expect the company to achieve revenue of 509/6.88/919 million yuan and net profit of 2.03/2.68/349 million yuan respectively in 2023/2024/2025. According to the relative valuation of the company's business, we gave the company 40.0 times PE in 2023, corresponding to the target price of 140.0 yuan. First coverage, giving a “recommended” rating.
Risk warning:
1) Product sales fall short of expectations, and the company's product share is still in a period of rapid growth. If sales fall short of expectations due to product promotion and competition, etc., it will adversely affect future revenue; 2) New product promotion falls short of expectations, and the company's many new products are still in the market education and promotion stage. If subsequent promotion falls short of expectations, sales growth will be affected; 3) The impact of national policies. If the company's products are included in centralized procurement, product prices are at risk of falling, which may adversely affect performance, etc.