Revenue increased by 20.2%, and adjusted net profit increased by 29.8%. The increase was in line with expectations. The company announced its 2019 annual results announcement: revenue of 669 million yuan, an increase of 20.2%; gross profit of 535 million yuan, an increase of 17.5%; net profit of 129 million yuan, an increase of 6.7%; adjusted net profit of 255 million yuan, an increase of 29.8%. Non-recurring items: (1) In 2018, Xianjian Shenzhen distributed profits to the parent company and generated income tax of about 104 million yuan; (2) share-based payment expenses in 2019 were 125 million yuan, an increase of 64 million yuan over 2018. The share options granted by the company in May 2018 and August 2018 were cancelled on December 31, 2019.

The left auricle drives overall growth. By business, structured cardiology business: revenue was 274 million yuan, up 31.7% year on year, accounting for 41% of revenue. Among them, HeartRTM blocker revenue increased by about 9.1%, CerATM blocker revenue increased by about 46.2%, CarafleXTM blocker revenue increased by about 29.7%, and LambreTM left atrial occluder revenue was 64 million yuan, an increase of about 54.1% over the previous year. External business: Revenue was 373 million yuan, an increase of about 8.6% over the previous year, accounting for about 55.7% of revenue. Among them, revenue from laminated stents increased by about 7.1%, and venous venous filter revenue increased by about 7.6%. Pacing electrophysiology business: Revenue was 22 million yuan, an increase of about 300% over the previous year.

The peripheral business has entered a period of harvest in R&D. Peripheral pipelines are rich, and products marketed in 20-23 are worth looking forward to: CE certification for the laminating stent system during aortic surgery, CE and NMPA certification for the iliac internal laminating stent system+iliac artery bifurcation stent system, CE and NMPA certification for the YuranoSTM abdominal aortic laminating stent system, CE and NMPA certification, Fitaya

CE and NMPA certification for venous venous filters, CE and NMPA certification for aortic arch stenting systems, NMPA certification for drug-eluting peripheral balloon catheters, etc.

Profit forecast and investment advice: Revenue growth rate is expected to be 9.6%/23.0% in 20-21, net profit growth rate of 45.6%/22.4%, EPS 0.04/0.05 yuan/share, and the current stock price corresponds to PE38/31x.

Using the DCF method, the company obtained a reasonable value of HK$2.10/share. The company is about to enter a harvest period of R&D for peripheral products. Growth is expected to accelerate. For the first time, coverage was given a “increase in holdings” rating.

Risk warning: R&D progress falls short of expectations; sales fall short of expectations; industry policy risks.