CICC: Raises MICROPORT target price to HKD 11, rating "Outperform the Industry"

According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that it maintains MicroPort Scientific Corporation (00853) 2025 net loss attributable to shareholders at USD 39.54 million unchanged, and introduces a forecast for 2026 net profit attributable to shareholders of USD 73.81 million for the first time. The firm maintains an outperform rating. Considering the company's successful loss reduction and the overall recovery of the Hong Kong pharmaceutical sector, the firm raised its target price based on the DCF model (WACC=9.4%, perpetual growth rate 1.1%) by 57% to HKD 11. The firm believes that the company's loss reduction in 2024 is in line with expectations. CICC's main points are as follows: The loss reduction in 2024 is in line with the firm's expectations The company announced its 2024 performance: revenue of USD 1.031 billion, a year-on-year increase of 9.6% after excluding exchange rate effects. The loss for the year was USD 268 million, compared to a loss of USD 649 million in 2023; the net loss attributable to shareholders was USD 214 million, compared to a loss of USD 478 million in 2023. Due to price reductions or centralized procurement of some core products, the revenue was slightly below the firm's expectations; however, due to good expense control, the reduction in losses was in line with the firm's expectations. Orthopedics and cardiac rhythm management business show improvement trends In 2024, 1) Orthopedic revenue increased by 6.2% year-on-year, and net losses narrowed by 67.1%, with EBITDA turning positive. Orthopedic revenue in China increased by 26.1% year-on-year, and the company won bids in all categories during the renewal of centralized procurement for artificial joints. The firm expects orthopedic revenue in 2025 to increase by about 10% year-on-year, with revenue in China expected to grow by 25-30% year-on-year. 2) Cardiac rhythm management revenue increased by 7.2% year-on-year, with revenue in China increasing by 51.3% year-on-year. The firm expects cardiac rhythm management revenue in 2025 to achieve a growth of 5-7% and to turn EBITDA positive. (Growth rates are all based on excluding exchange rate effects) Domestic cardiovascular business under varying degrees of pressure; overseas expansion accelerates significantly In 2024, in the domestic market, coronary revenue increased by 2.0% year-on-year; large artery and peripheral revenue increased by 1.6% year-on-year; neurointerventional revenue increased by 8.3% year-on-year; and heart valve revenue increased by 4.0% year-on-year. The firm believes that the slowdown in growth may be related to the rectification of the medical industry and the centralized procurement or price reductions of some core products. However, the company's overseas revenue was USD 95.8 million, a year-on-year increase of 84.7%. The firm expects overseas revenue to reach about USD 170 million in 2025, a year-on-year increase of about 80%. In addition, the surgical robot business saw a year-on-year revenue increase of 146% in 2024, with 39 global orders for the TUMAI, and 19 units commercialized domestically. The loss reduction in 2024 is in line with expectations, optimistic about achieving profitability around 2026 In 2024, the company's three expense ratios decreased by a total of 24 percentage points, and the firm expects this to further decrease by 11 percentage points in 2025, to about 57% in total. In 2024, the company is expected to generate approximately USD 115 million in income from the sale of subsidiaries and equity investments; the firm expects the company to continue focusing on its main business in 2025 and dispose of non-core assets, with such income likely to remain around USD 100 million. The firm expects the company's gross profit margin to be 53-54% in 2025. The firm anticipates that the company will continue to significantly reduce losses in 2025 and achieve profitability around 2026 Risk Warning: Procurement price reduction exceeds expectations, internationalization is below expectations, competitive landscape worsens, research and development failures