【行业研究报告】康德莱医械-Rich portfolios guarantee recovery in 2023E

22Mar202322Mar2023CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateKindlyMedical(1501HK)Richportfoliosguaranteerecoveryin2023EKindlyMedicalannouncedFY22earningswithrevenueofRMB585.9mn(+26.1%YoY)whichwere4.6%belowtheconsensusest.,mainlyduetosevereproductionconstraintsin2Q22andsignificantlydeclinednumberofsurgeriesin4Q22causedbyCOVID-19interruptionsinChina.GPMwasdown2.5pptsto56.8%(vs.59.3%in2021)becauseoftheincreasingproportionofrevenuefromtheagentbusiness,whiletheGPMofinterventionalmedicaldevicesimprovedby2.9pptsto65.4%in2022(vs.62.5%in2021).Additionally,KindlyMedicalexpandeditsteamsizeto1,632employeesin2022(vs.1,189in2021),leadingtoa42%YoYincreaseinthetotalcostofemployees.Asaresult,KindlyMedical’sattributablenetprofitin2022droppedby4.7%YoY,missingconsensusest.by24%.Expectsignificantrecoveryofdomesticbusinessin2023E.KindlyMedical’sproductportfolioofcardiovasculardevicehascoveredmostofPCIsupportingdevices.Bytheendof2022,theCompanyhasalreadycovered2,317(vs.2,100in2021)domestichospitalsincluding908TierIIIhospitals(vs.817in2021).Withtheextensivedistributionnetwork,weexpectKindlyMedicaltorapidlyrecoverin2023Easpent-upsurgerydemandsin4Q22graduallyunleashin2023EandthenegativeimpactofCOVID-19subsides.DrivenbydemandrecoveryaftertheCOVIDpandemic,weexpectthetotalnumberofPCIsurgeriesinChinatoincreaseby25%YoYin2023Eto1.5mn,whichwillleadtorapidgrowthofKindly’sPCIsupportingdevices.Overseasmarkettocontinuestronggrowthin2023E.Bytheendof2022,KindlyMedicalhas207(vs.184in2021)overseascustomerscoveringover58countriesandregions.In2022,theoverseasrevenueincreasedby44.3%YoYtoRMB148.5mn.Withsignificantcostadvantagesandimprovingbrandawareness,weexpectKindlyMedical’soverseasrevenuegrowthtoreach50%YoYin2023E.Enrichingpipelinesofinterventionaldevices.KindlyMedicalisgrowingasacomprehensiveplatformofinterventionaldevicesandisexpectedtoshowrobustrevenuegrowthinitsneurological,peripheralandorthopaedicinterventionaldevices.WeexpecttheCompanytoentertheharvestseasonforitsR&Dwithapproximately14productswhichwouldbeapprovedasClassIIImedicaldevicein2023E.MaintainBUY.WeexpectKindlyMedicaltorecoversolidgrowthandforecast45%YoYrevenuegrowthin2023E.WeslightlyrevisedourTPtoHK$31.41basedona9-yearDCFmodel(Terminalgrowthrate:2.5%,WACC:8.57%).TargetPriceHK$31.41(PreviousTPHK$31.39)Up/Downside16.5%CurrentPriceHK$26.95ChinaHealthcareJillWU,CFA(852)39000842jillwu@cmbi.com.hkCathyWANG(852)39161729cathywang@cmbi.com.hkStockDataMktCap(HK$mn)4,508.0Avg3mthst/o(HK$mn)27.352wHigh/Low(HK$)30.70/13.46TotalIssuedShares(mn)167.3Source:FactSetShareholdingStructureKindlyHolding25.5%HuaigeHealthInvestment9.1%Source:HKExSharePerformanceAbsoluteRelative1-mth-1.6%4.8%3-mth-5.8%-6.3%6-mth0.6%-3.7%Source:FactSet12-mthPricePerformanceSource:FactSetRelatedreport:1.SolidgrowthdemonstratesarapidrecoveryfromCOVIDs–22Aug2022EarningsSummary(YE31Dec)FY21AFY22AFY23EFY24EFY25ERevenue(RMBmn)4655868501,1861,588YoYgrowth(%)29.626.145.039.534.0Netprofit(RMBmn)140134154213294EPS(Reported)(RMB)0.860.790.951.301.78YoYgrowth(%)17.8(8.6)20.537.037.2P/E(x)26.628.924.017.512.7P/B(x)2.62.42.32.11.9Yield(%)1.00.91.11.52.0ROE(%)10.28.99.612.315.4Netgearing(%)NetcashNetcashNetcashNetcashNetcashSource:Companydata,Bloomberg,CMBIGMestimates