Results were under pressure in 2023 due to reduced demand for quarantine protective equipment and asset impairment. In 2023, the company achieved revenue of 4.127 billion yuan (-32.76%), net profit attributable to mother of 198 million yuan (-70.87%), and net profit not attributable to mother of 190 million yuan (-73.04%). Among them, 23Q4 single-quarter revenue was 918 million yuan (-52.69%), net profit attributable to mother was 102 million yuan (-145.17%), and net profit not attributable to mother was 94 million yuan (-137.62%). The 2023 results are under pressure, mainly due to: 1) reduced demand for quarantine protective equipment, with revenue of 580 million yuan (-79%), affecting the revenue side; 2) the calculation of inventory price reduction preparations and asset impairment preparations of 209 million yuan (of which 170 million yuan is related to quarantine protective equipment), which dragged down apparent profits. Regular business grew slightly, with regular business revenue of $3,522 billion (+4.90%) after excluding quarantine and protective equipment. Revenue for the first quarter of 2024 was 964 million yuan (-25.88%), net profit attributable to mother was 73 million yuan (-49.89%), net profit not attributable to mother was 75 million yuan (-46.99%).
The results for the first quarter of 2024 were still affected by the high base of quarantine and protective equipment in Q1 of 2023, and the regular business grew slightly.
The stoma and modern wound care and surgical sensing control business achieved rapid growth. By product line, in 2023, the basic wound care business achieved revenue of 1,072 million yuan (+3.2%), ostomy and modern wound care business revenue of 539 million yuan (+15.3%), surgical sensory control business revenue of 1,426 million yuan (+16.9%), stress treatment and fixed business revenue of 427 million yuan (-12.9%), and sensory control and protection business revenue of 641 million yuan (-78.0%). The basic wound care business has remained stable. The stoma and modern wound care and surgical sensory control business, which the company focuses on cultivating, has achieved relatively rapid growth. The stress treatment and fixation business has declined due to factory relocation, and the sensory control and protection business has declined sharply due to reduced demand for epidemic prevention materials. The gross margin of each business line increased by 2pp-5pp, mainly due to lower raw material costs and cost reduction and efficiency.
Excluding quarantine and protective equipment, domestic business remained flat, and overseas business grew. By region, the company's sales revenue in the domestic market in 2023 was 1.97 billion yuan (-52.0%), and sales revenue in the international market was 2.16 billion yuan (+6.5%). Domestic business is under pressure, mainly affected by reduced demand for quarantine protective equipment and industry rectification; overseas business grew slightly, mainly due to customer inventory removal and macroeconomic factors. Excluding quarantine and protective equipment, overseas business revenue was 2.16 billion yuan (+8.3%); domestic business revenue was 1.37 billion yuan, which was basically the same as the previous year. Among them, hospital line revenue was 872 million yuan (-7.7%), and online and offline retail revenue was 445 million yuan (+20.9%). Domestic theaters were under pressure due to industry restructuring, and retail channel expansion was smooth, and revenue grew rapidly.
Investment proposal: Considering the impact of industry restructuring and social inventory of quarantine protective equipment, the 24-25 profit forecast was lowered, and the profit forecast for 26 years was added. The estimated revenue for 2024-2026 was 46.0/54.5/6.39 billion yuan (the original 24.4/5.63 billion yuan), with a year-on-year growth rate of 11.5%/18.4%/17.4%, net profit to mother of 4.1/5.2/670 million yuan (originally 48/670 million yuan in 24.25), and a year-on-year growth rate of 108.9%/25.2%/ 29.0%. The current stock price corresponds to PE = 15/12/9x, maintaining the “buy” rating.
Risk warning: Consolidation of acquisition targets falls short of expectations; risk of price increases of raw materials; risk of exchange rate fluctuations.