Main points of investment
Event: in 2020, the company achieved operating income of 1.59 billion yuan, an increase of 26.2% over the same period last year, a net profit of 610 million yuan, an increase of 30.1% over the same period last year, and a net profit of 550 million yuan, an increase of 30.8% over the same period last year. 2021Q1 achieved an operating income of 380 million yuan, an increase of 62.8% over the same period last year, a net profit of 130 million yuan, an increase of 46.4% over the same period last year, and a non-return net profit of 120 million yuan, an increase of 80.4% over the same period last year. The performance is in line with our expectations. The company plans to pay a cash dividend of 8 yuan for every 10 shares and a dividend yield of 1.3%.
The domestic epidemic situation has stabilized and Q1 sales have rebounded significantly: the outbreak of the 2020Q1 COVID-19 epidemic has had a great impact on the company's sales. With the stabilization of the domestic epidemic, 2021Q1's sales revenue has rebounded sharply, and the growth of trauma products in its core business is expected to be about 60%. In 2020, the company's sales expenses were 500 million yuan (+ 22.6%), the sales expense rate was 31.67% (- 0.93pp), the management expenses were 62.8 million yuan (+ 39%), the management expense rate was 3.96% (+ 0.37pp), the R & D expenses were 130 million yuan (+ 27.5%), and the R & D expense rate was 8.07% (+ 0.09pp).
The rapid growth of orthopedic products and the steady development of other product lines: in terms of business, the company's revenue from trauma products reached 980 million yuan in 2020, an increase of 23.1% over the same period last year; revenue from spinal products reached 370 million yuan, an increase of 39.3% over the same period last year; revenue from minimally invasive surgical products reached 110 million yuan, an increase of 21.7% over the same period last year; and revenue from neurosurgical products reached 38.13 million yuan, an increase of 10.6% over the same period last year. So far, the company has a total of 277 batches of registration certificates in applications, covering trauma, spine, minimally invasive surgery, neurosurgery, dentistry, joints, sports medicine and other fields, the product line is expected to continue to enrich.
The fixed increase brings long-term momentum, and equity incentives demonstrate the company's confidence: in September 2020, the company announced plans to raise 1 billion yuan, mainly for orthopaedic implantable materials production line expansion project and oral implant production line construction. At present, China's dental implant market accounts for only 10% of the domestic market, and there is plenty of room for import substitution.
Since its launch, the company's implant products have received good feedback from the market, and it is expected to increase the volume quickly with the help of the company's professional medical and marketing team. In April 2021, the company issued an equity incentive plan, with the performance evaluation target based on 2021 net profit, with net profit growth rates of no less than 24%, 55% and 95% in 2022, 2023 and 2024, respectively. This incentive plan is expected to fully mobilize the enthusiasm of the management team, effectively enhance the company's staff cohesion and stability, further enhance the company's core competitiveness, and help the company's future performance continue to develop at a high speed.
Profit Forecast and Investment rating: we maintain the forecast of 2021-2022 net profit of 737 and 938 million yuan, and the estimated net profit of 2023 is 1.175 billion yuan. The current market capitalization corresponds to 35 times, 27 times and 22 times of PE in 2021-2023, respectively, maintaining a "buy" rating.
Risk hint: the risk that the price reduction of the product is higher than expected; the risk that the quantity of new product is less than expected, etc.