2023 results are in line with our expectations

The company announced 2023 results: revenue of US$154 million, +12.5% YoY; net profit to mother of US$45.07 million, +143.8% YoY; adjusted net profit of US$46.15 million, +73.1% YoY. The results were in line with our expectations.

Development trends

The US, Japan, Europe, and Asia Pacific are growing steadily, and China is under pressure. In 2023, in terms of segmentation by market segment:

Revenue in the US was +27.9% YoY, mainly the growth contribution of peripheral balloons, semi-compliant balloons, and notched balloons; the company and Abbott extended the exclusive distribution agreement; Japan's revenue was +17.2% (yen caliber +26.3%), mainly the growth contribution of three-lead wire notched balloons; revenue in Europe, the Middle East and Africa was +12.6%; Asia Pacific (excluding China and Japan) revenue was +14%; while the volume of surgery in the Chinese market fluctuated, and revenue remained about -7.3% (RMB caliber remained flat) The company determines PCI The number of surgeries has gradually recovered since the beginning of 2024. Since the second half of 2023, the company has successively acquired South Korean distributor ST Medicare and Indonesian distributor PT Revass Utamamedika, further expanding its global sales network. In 2023, the company's direct sales and distribution revenue contributed 52%/48% respectively.

The R&D pipeline is progressing smoothly. In 2023, the company's EZ Guide extension catheter was approved for marketing by the China Drug Administration; the EZ Guide extension catheter and Scoreflex TRIO three-guide wire balloon obtained the EU CE mark. By the end of 2023, the company had approved the listing of 20/27/26/14 products in China, Japan, Europe and the US, respectively. In April 2023, clinical enrollment of three-guide wire balloons began in China. The company expects to submit a registration application to the State Drug Administration on 2H24. The company expects the tricuspid valve product Tricvalve to begin clinical enrollment in China in 2Q24. Products under development, such as the Corepass modular microcatheter, support catheter, and JadeoTW product line extension, are progressing smoothly. The company expects to submit registration applications for these products to major regulatory agencies around the world within 2024. Furthermore, at the end of 2023, the company acquired EucateChag from Germany and obtained four products: coronary stents/medicine balls and peripheral self-inflating stents/medicine balls. We expect to introduce the company's mature global channels in the future and accelerate revenue contributions around 2025. The company has also set up an R&D and production base in Fuyang, Hangzhou, and construction will officially begin in 2023. The company expects to put it into use around 2027, at which time it can increase production capacity by an additional 2.4 million pieces per year.

Profit forecasting and valuation

We keep our 2024/25 profit forecast unchanged, and the current stock price corresponds to 8/7 times the 2024/25 price-earnings ratio.

We maintain our outperforming industry ratings. Considering the overall correction in the pharmaceutical sector of Hong Kong stocks, we lowered our target price by 39% to HK$5.8, which corresponds to a price-earnings ratio of 12/10 times 2024/25, and there is 50% room for an increase of 50% compared to the current stock price.

risks

The competitive landscape deteriorated, R&D failed, internationalization fell short of expectations, and industry restructuring affected the development of surgery.