Aohua endoscope (688212)
The demand driving points of China’s soft mirror market are sufficient, and the policy driven import substitution trend is expected to accelerate. In the past, the global soft mirror market maintained a steady growth rate of about 9%. Due to the increasing trend of gastrointestinal screening and treatment penetration, the growth rate in the Chinese market is faster, with an average annual compound growth rate of more than 16%. However, the top three foreign-funded manufacturers occupy more than 90% of the market share of the Chinese market, and there is a huge space for domestic replacement. In recent years, the promotion of a series of domestic substitution policies is expected to accelerate the domestic substitution trend of the endoscope industry. At the same time, the promotion of graded diagnosis and treatment policies in China will also open up the potential demand of grass-roots medical institutions.
The cost performance advantages of domestic products are prominent, and portable products gradually open up a sinking market. While the company’s VME and AQ series soft mirror products can meet the needs of doctors, the purchase price of hospitals has significant advantages over imported manufacturers. In 2020, the product price range is about 75% of the price of foreign-funded products, which has become one of the key factors to replace imports. At the same time, in 2022, the company launched ac-1 portable soft mirror host, which has stronger adaptability in the face of the complex examination environment of mobile medicine and can better meet the needs of the sinking market.
The pipeline under research is rich and the iteration cycle is fast. The new generation of 4K ultra clear products help domestic substitution. Aq-300, the company’s next-generation new product equipped with 4K UHD system, currently shows great clinical advantages. The product is expected to be approved in 2023. After listing, it is expected to help the company quickly break the pattern of foreign monopoly in high-grade hospitals. At the same time, the company attaches importance to R & D and innovation. At present, there are many independent R & D technology reserves. In the future, relying on key technologies, the company is expected to obtain certain advantages in competition with foreign manufacturers.
IPO fund-raising improves core competitiveness, and equity incentives set high growth targets. The company was successfully listed on the science and innovation board in November 2021, raising 659 million yuan, which will be mainly used for the construction of the company’s production, R & D and sales capacity. It is expected that the company’s industrial competitiveness will be further improved in the future. In addition, the company implemented the equity incentive plan at the beginning of 2022 and set the high growth target of revenue and profit from 2022 to 2024, which shows the company’s confidence in new products and business development in the future.
Profit forecast and investment suggestions
It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 63 / 0.98/147 million, with a year-on-year increase of 10% / 55% / 50%, and the corresponding EPS will be RMB 0.47/0.73/1.10 respectively. Considering the company’s dominant position in the field of soft mirrors in China and the large-scale expectation after the launch of aq-300 new products, the company is given a 9-fold PS valuation in 2023, a target market value of 6 billion yuan within 12 months, a target price of 44.64 yuan / share, and a “buy” rating for the first time.
Risk tips
The risk that the research and development of new products does not meet the expectations; Risk of product promotion failing to meet expectations; Overseas trade friction risk; Covid-19 epidemic recurrence risk; Low inventory turnover; The risk of lifting the ban on restricted shares; High valuation risk.
