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社区
会员
机构：中金公司
研究员：Yanyin ZHU/Jin ZHANG/Peng ZOU/Fang QUAN
We initiate coverage on Vishee Medical Technology with an OUTPERFORM rating and a target price of Rmb68.00, implying 23.9x 2022e P/E.
Why OUTPERFORM rating?
Large growth potential in China’s rehabilitation therapy equipment market. Yidu Data estimates China’s rehabilitation therapy equipment market was Rmb38.0bn in 2020 and will grow at a CAGR of 16.3% to Rmb81.0bn by 2025. We believe the market enjoys ample room for growth, mainly driven by: 1) strong demand for rehabilitation therapies bolstered by a large patient base, and low rehabilitation facilities per capita; 2) inclusion of rehabilitation therapies in the national medical insurance program in multiple regions of China; and; 3) the launch of rehabilitation pilot projects by the National Health Commission.
Tiered product portfolio - with magnetic stimulation products at the core and supplemented by rehabilitation robots and energy-based device - to drive sustained revenue growth. In 2016, Vishee Medical made a breakthrough in magnetic stimulation technology and launched a transcranial magnetic stimulation (TMS) device. TMS is a noninvasive procedure that uses magnetic fields to stimulate nerve cells in the brain to treat psychiatric and neurological disorders. It has been included in China’s medical insurance reimbursement list, which we expect to drive sales of the product. The firm rolled out a functional magnetic stimulation (FMS) product in 2017, and saw the inclusion of this type of treatment - which combines magnetic and electrical stimulation - into official treatment guidelines in China in 2020. We expect the firm to expand its presence from the obstetric to the gynecological care market on the back of its magnetoelectric products, unleashing its growth potential. In 2021, the firm’s pelvic floor and postpartum recovery business contributed 60% of total revenue. In addition, Vishee Medical enjoys a previous-mover advantage and strong technology expertise. The firm launched an exoskeleton rehabilitation robot in 1H22, and expects its powered magnetic stimulation (PMS) series and energy-based medical aesthetic devices to hit the market in 2022-2023. We believe the firm will benefit from trends in consumption upgrades and import substitution.
Development of independent R&D capability and widening of marketing network. In 2009, Vishee Medical began to build its R&D team. By December 2021, the firm’s R&D personnel accounted for 28% of total staff, with its R&D expense ratio at 14.8%. It held 105 granted patents (including 18 invention patents) and 20 registration certificates for medical equipment, which we see as strengthening its competitive advantage. The firm adopts a differentiated marketing strategy, supplying more than 8,000 hospitals and institutions by leveraging hundreds of distribution channels across China.
How do we differ from the market? Vishee Medical continues to expand its presence into high-end and mainstream products, maintaining its leading position, in our view. The firm boasts extensive expertise in magnetic stimulation technologies and well-established distribution channels. Some of these products have started contributing earnings. In addition, we expect the firm’s energy-based device to lead China’s medical aesthetics equipment market, riding domestic policy tailwinds.
Potential catalysts: Rehabilitation policy and charging rules continue to improve, boosting demand for rehabilitation equipment; launch of its energy-based product progresses better than we expected.
Financials and valuation
Our EPS forecast is Rmb2.85, Rmb3.52, and Rmb4.27 in 2022, 2023, and 2024, a CAGR of 22.3%. The stock is trading at 19.6x 2022e and 15.9x 2023e P/E. We initiate coverage on Vishee Medical with an OUTPERFORM rating and a target price of Rmb68.00, implying 23.9x 2022e P/E and 19.3x 2023e P/E with 21.4% upside.
Risks
Product R&D disappoints; uncertainties in new products sales; non-hospital market expansion disappoints.