Incident 1: The company released its 2023 annual report: achieved revenue of 471 million yuan (-1.3% YOY), net profit to mother of 146 million yuan (-20.2% YOY), and net profit after deducting non-return to mother of 136 million yuan (-19.2% YOY).
Incident 2: The company released its 2024 quarterly report: achieved revenue of 118 million yuan (-20.7% YOY), net profit attributable to mother of 38.44 million yuan (-20.7% YOY), and net profit after deducting non-return to mother of 36.46 million yuan (-21.4% YOY).
Comment:
Apparent net profit declined a lot in '23 due to share payments and losses from joint ventures; 24Q1 was affected by the high base of 23Q1, and revenue declined. The company's revenue declined slightly year-on-year in '23, mainly due to delays in iterations of new systems for major customers. In 2023, the company achieved a gross profit margin of 63.7% (-0.63pct compared to '22-0.63pct), and achieved a net profit margin of 30.2% (compared to 22-7.9pct). The decline in the company's net profit was mainly due to increased share payment expenses, increased investment losses in joint ventures confirmed by Sinopharm Xinguang, and increased depreciation of the second-phase plant and machinery and equipment. The decline in 24Q1 revenue is mainly due to the large inventory preparation of goods from major US customers in 23Q1. The company's delivery pace has remained basically normal since 24. We believe that the company's quarterly revenue is expected to improve month-on-month and achieve steady growth.
The domestic performance of endoscopic products is strong and is expected to maintain rapid growth. In 2023, the company's endoscopic products grew strongly in the domestic market. Revenue increased by about 83% year on year. The main reason was that the company actively explored the domestic market, the marketing system was gradually improved, and the brand influence continued to increase. With the continuous expansion of the company's endoscopic product business and the promotion of second-generation complete machine products on the clinical side, we are optimistic about the promotion of the company's complete machine business, and the company's domestic endoscopy business is expected to maintain rapid growth.
The variety of lenses continues to expand, and market competitiveness continues to increase. In overseas markets, the scope of cooperation between the company and American customers continues to expand, gradually expanding from the original laparoscopy to the fields of urination, gynecology and open surgery. The 4mm hysteroscope developed for the US market has completed product finalization and is expected to be introduced to the market in June 24; 2.9 mm cystoscopy, 3 mm pediatric laparoscopy, and open surgical exoscopes are also under development. In the domestic market, arthroscopy, 3D laparoscopy, and thoracic endoscopy have begun to be put on the market, and a full range of laparoscopes (including dozens of specifications such as white light, fluorescence, defogging, 3D fluorescence, standard length, extended type, and ultra-fine type) are being registered and verified one after another. The company's range of endoscopic lenses is becoming more and more diverse, and its competitiveness is constantly increasing.
Profit forecast, valuation and rating: Affected by the pace of order signing with US customers, we lowered the company's 24-25 net profit forecast to RMB 2.10/277 million (down 15%/19% from the previous forecast), and added a net profit forecast of 359 million yuan for 26 years. The PE corresponding to the current price was 24/19/14 times, respectively. The new product market response from the company's major customers is good. The company's complete machine business is expected to contribute to growth, and quarterly revenue is expected to continue to improve month-on-month, maintaining a “buy” rating.
Risk warning: New orders fall short of expectations; promotion of new products falls short of expectations; risk of trade friction, etc.