CHUNLI MEDICAL(688236) 浦银国际证券·2024-10-20 02:30Investment Rating - The report initiates coverage on Spring Medical (688236.CH/1858.HK) with a "Buy" rating, setting a target price of RMB 16.20 for A-shares and HKD 10.60 for H-shares [2][3]. Core Insights - Spring Medical's revenue is significantly driven by joint products, which are expected to recover post-2024 as the procurement risks associated with national collection clear up. The company is well-positioned to benefit from the anticipated growth in the orthopedic consumables market due to an increase in patient numbers, improved treatment rates, and domestic product substitution [2][3]. - The orthopedic consumables sector is projected to experience a recovery in growth following the normalization of anti-corruption measures and the completion of national procurement processes. The company’s knee joint products have also secured procurement contracts, further enhancing revenue visibility [2][3]. Financial Forecast and Valuation - The financial projections indicate a revenue of RMB 1,209 million for 2023, with a decline to RMB 989 million in 2024, followed by a recovery to RMB 1,165 million in 2025 and RMB 1,357 million in 2026. The net profit is expected to decrease from RMB 278 million in 2023 to RMB 260 million in 2024, before rising to RMB 311 million in 2025 and RMB 369 million in 2026 [4][12][13]. - The report assigns a target valuation multiple of 20x for A-shares and 12x for H-shares based on the 2025 estimated PE, reflecting a 40% discount for H-shares compared to A-shares [3][6]. Market Context - The orthopedic industry has achieved near-complete national procurement coverage, with joint products expected to see the first alleviation of procurement pressure. The average price reduction for joint products is projected at a moderate 6% [15][18]. - The domestic market share for orthopedic implants is estimated at around 50%, with significant room for growth, particularly in the joint and spinal categories, as domestic brands gain traction following national procurement initiatives [18][19].