20220328-招银国际-爱康医疗-01789.HK-High-margin_customized_and_revision_products_to_drive_long-term_growth_4页_1mb

报告摘要

AK Medical (1789 HK) Company Update Summary

Core Content

AK Medical is a leading company in the orthopedic implants sector, focusing on high-margin customized and revision products to drive long-term growth. Despite facing challenges in 2021 due to national Volume-Based Pricing (VBP) policy, which led to a significant decline in revenue and net profit, the company is positioned to recover and grow in the coming years.

Key Financial Performance (FY20A–FY24E)

Revenue: RMB1,035mn (FY20A), RMB761mn (FY21A), RMB1,045mn (FY22E), RMB1,367mn (FY23E), RMB1,746mn (FY24E)
YoY Growth: 11.7%, -26.5%, 37.2%, 30.9%, 27.7%
Net Profit: RMB314mn (FY20A), RMB93mn (FY21A), RMB162mn (FY22E), RMB238mn (FY23E), RMB338mn (FY24E)
YoY Net Profit Growth: 11.0%, -70.8%, 74.5%, 46.7%, 42.0%
EPS (RMB): 0.28 (FY20A), 0.08 (FY21A), 0.15 (FY22E), 0.21 (FY23E), 0.30 (FY24E)
YoY EPS Growth: 11.0%, -70.8%, 74.5%, 46.7%, 42.0%
P/E Ratio: 12.2 (FY20A), 41.9 (FY21A), 24.0 (FY22E), 16.4 (FY23E), 11.5 (FY24E)
P/B Ratio: 1.9 (FY20A), 1.9 (FY21A), 1.8 (FY22E), 1.7 (FY23E), 1.5 (FY24E)
Yield (%): 1.0 (FY20A), 0.6 (FY21A), 1.0 (FY22E), 1.5 (FY23E), 2.2 (FY24E)
ROE (%): 15.4 (FY20A), 4.6 (FY21A), 7.5 (FY22E), 10.2 (FY23E), 13.1 (FY24E)

Main Points

Impact of VBP Policy: In 2021, the national VBP policy caused a sharp decline in revenue and net profit due to price cuts in hip and knee joint products. Revenue dropped by 26.5% YoY, and net profit fell by 70.5% YoY.
Product Mix: Hip and knee implants remain the main revenue contributors, but the company is focusing on high-margin products such as revision and customized implants. In 2021, revision products accounted for 15.1% of total revenue, while customized products contributed 2.6%.
ICOS Services: AK Medical is expanding its Innovative Customized Orthopedic Solution (ICOS) services, which include preoperative planning, bone model printing, and 3D-printed implants. The company expects ICOS income to grow from RMB23.3mn in 2021 to c. RMB100mn in 2023E.
R&D Investment: R&D expenses increased by 7.7% YoY in 2021, reaching a 14.8% R&D expense ratio. The company is actively developing new products, including the Hip VTS Navi System and Portable Robotic System, aiming for NMPA approval in 2022E and 2023E.
Valuation and Target Price: The company's target price is revised to HK$7.69, up from a previous estimate of HK$11.45. This reflects expectations of strong growth in high-margin products. The company is projected to have a solid financial position with a growing net profit and improved margins.

Key Information

VBP Procurement Success: AK Medical won 20% of the national VBP procurement volume, indicating around 100,000 units of annual procurement. This success enables expansion into tired hospitals in China.
Sales Channel Expansion: Winning VBP tenders allows the company to expand its sales channels, increasing its market presence.
Financial Ratios:
- Gross Margin: Expected to rise from 60.00% (FY22E) to 62.00% (FY24E)
- Operating Margin: Projected to increase from 17.48% (FY22E) to 22.29% (FY24E)
- Net Margin: Anticipated to grow from 15.51% (FY22E) to 19.33% (FY24E)
Cash Flow: Net cash from operating activities is expected to improve, with projections of RMB511mn in FY22E and RMB378mn in FY24E.
Balance Sheet: Current ratio is expected to decline slightly from 4.6 (FY20A) to 2.7 (FY24E), but the company remains in a strong net asset position.

Investment Recommendation

Rating: BUY
Target Price: HK$7.69
Previous Target Price: HK$11.45
Upside: +80.94% from current price (HK$4.25)

Analyst and Contact

Analyst: Jill Wu, CFA
Contact: (852) 3900 0842, jillwu@cmbi.com.hk

Disclaimer

This report is prepared by CMB International Global Markets Limited (CMBIGM) for informational purposes only. It does not constitute investment advice and is subject to change. The information is based on publicly available data and should not be relied upon without independent verification. CMBIGM does not assume responsibility for any decisions made based on this report.