Core views

The company's 2024H1 performance is in line with expectations. The coronary business continues to grow rapidly. The core product HT Supreme coronary stents are about to be approved in the US market; the future development trend of the neurological intervention business is improving, and the approval process for the major product intracranial self-inflating drug stents is progressing according to plan. Looking ahead to the second half of the year, the company's performance is expected to maintain rapid growth, and the approval of innovative products opens up room for the company to grow. Among them, the coronary business is expected to maintain rapid growth in the second half of the year, mainly because 1) coronary stent products are still in the rapid release stage after re-entering the national coronary stent collection market; 2) the innovative coronary product spinous balloon 3+N Alliance is expected to achieve rapid release in the allied region after winning the bid. The company's neurological intervention business was affected in the short term by intracranial balloon collection and the slowdown in admission of innovative products, and is expected to maintain steady growth in the second half of the year. The company's first self-expanding intracranial drug stent in the world is expected to be approved by the end of this year and the beginning of next year, opening up a new growth curve for the company's neurological intervention business.

occurrences

The company released its 2024 semi-annual report

In the first half of 2024, the company achieved revenue of 0.214 billion yuan (+32.5%), achieved net profit attributable to mother of 7.66 million yuan (+125.9%), turned loss from mother to profit, and realized net profit deducted from non-mother - 12.59 million yuan (+64.0%). Basic earnings per share were 0.02 yuan/share.

Brief review

The results for the first half of the year were in line with expectations, and the profit side turned a loss into a profit

In the first half of 2024, the company achieved revenue of 0.214 billion yuan (+32.5%), achieved net profit attributable to mother of 7.66 million yuan (+125.9%), turned loss from mother to profit, and realized net profit of 12.59 million yuan (+64.0%, compared to -34.98 million yuan in the same period last year). Based on this calculation, it is estimated that Q2 2024 will achieve revenue of 0.123 billion yuan (+39.2%); net profit to mother of 5.16 million yuan (+138.5%), after deducting non-return net profit of 5.2 million yuan (+135.4%), the profit side will turn a loss into a profit.

By business: the coronary business H1 achieved revenue of about 0.122 billion yuan (+70.8%), and the coronary business maintained a rapid growth trend; the neurological intervention business H1 achieved revenue of about 0.091 billion yuan (+2.7%), and the neurological intervention business maintained steady growth.

The company's performance in the first half of the year was in line with expectations. Due to the sharp increase in operating income and the year-on-year increase in operating costs and sales expenses, the increase was less than the increase in operating income, compounded by factors such as a year-on-year decline in management expenses, a year-on-year increase in R&D expenses, and a sharp increase in investment income, resulting in a sharp increase in the company's net profit in the first half of the year compared to the same period last year, turning a loss into a profit.

Looking ahead to the second half of the year, the company's performance is expected to maintain rapid growth. Innovative products are approved to open up the company's growth space, and the company's coronary business is expected to maintain rapid growth in the second half of the year, mainly due to 1) the company's coronary stent products re-entered the national coronary stent collection market in early '23 and are still in the rapid release stage; 2) the company's innovative coronary product spiny balloon 3+N Alliance won the bid after winning the bid. The company's neurological intervention business was affected in the short term by intracranial balloon collection and the slowdown in admission of innovative products, and is expected to maintain steady growth in the second half of the year. The company's first neurointerventional product, a self-inflating intracranial drug stent, is expected to be approved by the end of this year or the beginning of next year, opening up a new growth curve for the company's neurological intervention business. Overall, the company's performance is expected to maintain rapid growth in the second half of the year, and innovative products have been approved one after another to open up room for the company's growth.

The coronary business continues to grow rapidly. The core product HT Supreme coronary stents have been approved in the US market. The company's coronary intervention business is expected to achieve revenue of about 0.122 billion yuan, an increase of 70.8% over the previous year. The sales volume of two coronary stent products and sales of coronary balloon products that have entered the national collection for renewal have increased dramatically. Up to now, sales of the company's coronary stent products in 2024 have exceeded the volume collected in 2024, a significant increase over the same period last year. The company's next-generation coronary drug-eluting stent system, HT Supreme, is the world's first healing-oriented coronary stent system. It is also the first cardiac stent product independently developed by China, the United States, Japan, and Europe to simultaneously conduct pre-stent clinical research and apply for product patents in the above countries and regions. The company's coronary product spinous balloon obtained the NMPA registration certificate in September 23, and won the first place bid in the Beijing-Tianjin-Hebei 28 Consumables Alliance collection, which began in December 2023. As the participating provinces implement the collection results one after another, the spinous balloon is expected to achieve rapid admission and release within the alliance by taking into account the advantages of passability, cutting effect and safety. In the first half of 2024, the company verified process optimization and capacity expansion for spinous balloons to ensure sufficient product supply.

In the first half of 2024, the company's HT Supreme drug-eluting stent system successively obtained overseas registration certificates in countries and regions such as Bangladesh, Hong Kong, China, South Korea, Belarus, and Mexico; the company's two coronary balloon dilatation catheters (SC HONKYTONKTM) and (NCROCKSTART) obtained overseas registration certificates in Pakistan and South Korea, respectively. At the same time, HT Supreme submitted the final application data approved by the US before listing to the US FDA in December 2021, and was officially accepted by the FDA. It is expected to be approved by the end of this year and the beginning of next year. With the gradual expansion of the overseas sales scope of the company's core coronary product, HT Supreme, it is expected to help the company maintain rapid growth in its coronary business.

The future development trend of the neurological intervention business is improving. The approval process for the blockbuster intracranial self-inflating drug stent is progressing according to the plan. H1 is expected to achieve revenue of 0.091 billion yuan, an increase of 2.7% over the previous year. The low revenue growth rate is mainly due to a combination of factors such as the decline in unit price and sales volume of neurointerventional balloon products during the reporting period, compounded by factors such as increased sales of intracranial stents and 9 new neurosurgical products. In the first half of 2024, the company's neurointerventional delivery catheter was approved, and the balloon catheter was registered and accepted. It is expected to be approved in the second half of '24. The company has made progress to varying degrees in the development of new neurointerventional products. The company's layout of various new products in the neurological field is in accordance with the R&D plans, including:

1) The intracranial self-inflating drug stent was approved as an innovative device and submitted for NMPA registration. It was accepted by the NMPA in May 2024, and is expected to be approved by the end of this year or the beginning of next year. This product is the world's first intracranial self-inflating drug stent. The excellent delivery performance makes clinical operation easier, can reach farther blood vessel locations, and has a larger treatment range; the patented drug coating technology effectively inhibits excessive proliferation of smooth muscle and reduces the rate of re-stenosis.

2) The clinical trial of the company's coated dense mesh stents completed all clinical follow-up, and the results met expectations. This product is currently the only coated dense mesh stent in China. The application of “coating” will make this stent product have better biological properties to reduce the time it takes to take anticoagulants later. At the same time, some specifications of this product are compatible with 0.017in microcatheter release, which can treat aneurysms in small and medium blood vessels in the distal end of the brain. Applications for registration are scheduled to be submitted in the second half of 2024 and are expected to be approved in the second half of '25.

Benefiting from rapid revenue growth, the company's financial indicators improved markedly. In the first half of 2024, the company's comprehensive gross profit margin was 59.20% (+1.46pct). The slight increase in gross margin was mainly due to the sharp year-on-year increase in sales of balloon and stent products, and the gross margin increased due to the scale effect. Sales expense ratio 17.32% (-2.22 pct); R&D expense ratio is 19.86% (-11.28pct); R&D expense ratio was drastically reduced. The main subsidiary, Sano Shenchang, was officially put into operation in the second quarter of 2023. From the date of commissioning, it was due to the combined effects of factors such as amortization of intangible assets and reduction in share payment costs; the R&D expense ratio was 31.95% (-0.55 pct), and the R&D expense ratio was basically flat, and the main merger added the US eLum company and The increase in R&D projects and the entry of some R&D projects into key milestones, due to increases in materials, labor costs, animal testing costs, clinical trial costs, and intangible asset amortization; the financial expense ratio is 0.99% (+0.58 pct), and the slight increase in financial expense ratio is mainly due to a combination of factors such as an increase in interest on loans and a decrease in interest income on deposits.

In the first half of 2024, the company's net operating cash flow was 13.0026 million yuan, a year-on-year decrease of 16.72%. It was mainly due to a combination of factors such as increased sales receipts, reduced tax rebates and financial subsidies, as well as increased purchases of goods, cash payments to employees, and various taxes. The number of accounts receivable turnover days in the first half of 2024 was 13.58 days, a year-on-year decrease of 8.38 days, the number of accounts payable turnover days was 53.04 days, a year-on-year decrease of 5.73 days, and the number of inventory turnover days was 249.83 days, a decrease of 10.66 days year-on-year, and inventory levels were well controlled. The company's other financial indicators are generally normal.

Laying out in the field of coronary and neurological intervention, two-wheel drive achieved rapid growth in the company's performance. The company has a relatively complete product layout in the field of coronary and neurological intervention, and achieved rapid growth in the company's performance with two-wheel drive. In the coronary field, the company's coronary stents re-entered the domestic market through nationwide procurement and renewal to achieve rapid release in the domestic market; coronary spiny balloons won the Beijing-Tianjin-Hebei “3+N” alliance collection in September 23, which is expected to achieve rapid online hospital sales; in overseas markets, the company's coronary stents and accessory products have been approved in many countries. At the end of this year or the beginning of next year, HT Superme coronary stents are expected to enter the US market through FDA approval. In the field of neurological intervention, the company's product layout has achieved full coverage of hemorrhage, acute ischemia, stenosis ischemia, and pathway fields. Among them, the company's world-first self-inflating intracranial drug stent has excellent clinical data and is expected to be approved by the end of this year or the beginning of next year, driving the company's neurological intervention business to achieve rapid growth. We expect the company's revenue in 2024-2026 to be 4.59, 6.60, and 1,069 million yuan, respectively, with year-on-year increases of 33.64%, 43.89%, and 62.00% respectively; the net profit due to the company is expected to be 0.10, 0.35, and 130 million yuan, respectively, with year-on-year increases of 126.35%, 237.93%, and 268.11%, corresponding to PE 353, 105 and 28X, respectively, for the first time covered and given a purchase rating.

Risk warning:

1) The company's core product, intracranial dilatation balloons, is at risk of collection and price reduction. Nationwide joint collection of cardiovascular interventional consumables in Hebei Province has included intracranial balloons in the scope of collection. It is expected that the successful collection bid results will be announced at the end of this year. In the current profit forecast, the factory price of intracranial balloons will drop 25% year-on-year in 2025. The company's revenue is expected to be 0.648 billion yuan and 0.965 billion yuan respectively. 41.2%, 49.0%; 2) Risk of market competition due to increased competition in the neurointervention industry; 3) Significant decline or loss in performance: Although the company was selected in this round of coronary stent procurement, and sales of the company's coronary stent products in 2023 showed a significant increase compared to 2021-2022, in the context of normalization of collection, if products participating in collection cannot achieve effective sales volume when prices drop, it may cause the company's operating income to fall short of expectations, high unit production costs, and a decline in gross margin; 4) Raw material supply Risk: If the company fails to reach an agreement with relevant suppliers on commercial terms, or is affected by uncertain factors such as international politics, natural disasters, international trade disputes, etc., causing the company's raw material supply to be interrupted, it will adversely affect the company's production and operation; 5) Product development risk: Since most of the company's products are Class III high-risk medical device products, product technical content and clinical application risks are high, and national regulatory authorities may continue to improve product evaluation and regulatory requirements, which will extend the approval cycle for new products, which will indirectly cause the company's new products to be delayed or even unable to launch Obtaining registration or listing approval documents; 6) Macroenvironmental risks: The company has set up overseas subsidiaries in France, Japan, the United States, the Netherlands, etc. to carry out clinical trials or advance layout for subsequent overseas sales, and has achieved commercial implantation in European countries such as Ireland. As the global political situation becomes increasingly tense, various contradictions and conflicts occur from time to time, trade frictions and technological protection gradually escalate, the company, as a Chinese enterprise, may face unfair treatment in taxation, sales, R&D, etc. in the aforementioned countries and regions, which in turn adversely affects the company's business performance.