In the context of centralized procurement, most areas in the field of high-value consumables are currently highly competitive, with limited growth prospects. Therefore, the track with low penetration rate and low localization rate currently has long-term growth attributes. On the product structure, the operating income of products ranging from 10 to 30 billion yuan is 401/1288/60 million yuan, respectively.
According to the WiseMoney app, since 2019, the list of high-value consumables subject to volume-based procurement in China has gradually been completed. Currently, except for certain products such as aortic intervention and structural heart disease, all products in the field of high-value consumables have basically been procured through centralized purchasing. In the context of centralized procurement, most areas in the field of high-value consumables are currently highly competitive, with limited growth prospects. Therefore, the track with low penetration rate and low localization rate currently has long-term growth attributes. Moreover, companies with a good competitive pattern in the industry are expected to take advantage of their early appearances and to be the first to open up growth potential, such as Haokan Electrophysiology and Left Atrium Occluder.
The main viewpoints of Southwest Securities are as follows:
Regular and guaranteed centralized procurement is gradually becoming a market consensus. The logic of exchanging prices for quantities and improving domestic manufacturing rates is becoming feasible.
It covers almost all areas. Since 2019, the list of high-value consumables subject to volume-based procurement in China has gradually been completed. Currently, except for certain products such as aortic intervention and structural heart disease, all products in the field of high-value consumables have basically been procured through centralized purchasing. The decline has been gradually moderate. As an example, the proportion of domestic procurement in the field of coronary stent has decreased from 93% in 2020 to 60% in 2023.
The logic of replenishing quantity with price and some products' contract renewal and price increment are gradually being put into practice. For example, the average decrease in national procurement in the field of coronary stent in 2020 was 93%, and the price dropped below the factory price. The average renewal price in 2022 increased by 25%. Although the price remains between 700 and 800 yuan, the growth rate of the intended purchase quantity in the first year has increased significantly, up by 222% on average.
There is an improvement in domestic manufacturing: According to the prospectus of Weigao Orthopedics, the total market share of the top three foreign manufacturers, Johnson & Johnson, Medtronic, and Stryker, was only 59% in 2019. After centralized purchasing, the market share of domestic brands rose to 90%, making domestic manufacturing trends very significant. Some foreign companies such as Zimmer Biomet have withdrawn from the Chinese market completely due to high quotes.
Bullish on tracks with low penetration rate, low localization rate, or excellent competitive pattern, such as electrophysiology, left atrium occluder, peripheral artery stent, dense mesh stent, and chronic ischemic cerebrovascular drug stent.
According to Southwest Securities, most areas in the field of high-value consumables are currently highly competitive, with limited growth prospects. Therefore, the track with low penetration rate and low localization rate currently has long-term growth attributes. Moreover, companies with a good competitive pattern in the industry are expected to take advantage of their early appearances and to be the first to open up growth potential.
In summary, the penetration rate, domestic manufacturing rate, CR3, and the number of primary participants data in each track are statistically analyzed. Electrophysiology (penetration rate 10%, domestic manufacturing rate 12.5%, CR3 85%), left atrial occlusion device (penetration rate 6%, domestic manufacturing rate 25%, CR3 95%), peripheral artery stent (penetration rate 1%, domestic manufacturing rate 10%, CR3 66%), dense mesh stent (penetration rate 1%, CR3 90%), chronic ischemic cerebrovascular drug stent (penetration rate <10%, CR3 100%), etc. are promising. In addition, it is recommended to pay attention to the growth space brought by the improvement of penetration rates in fields with sufficient centralized procurement, such as orthopedics and coronary intervention.
Currently, high-value consumables have relatively small overseas volumes. In the future, they are expected to become a new area of growth.
In terms of volume, the revenue of overseas heart and brain intervention and orthopedic tracks is relatively large. In terms of revenue share, electrophysiology accounts for 15.3%, and aortic intervention, peripheral intervention, and orthopedic tracks account for 12.7%. As far as the overseas income growth rate in 2023 is concerned, ophthalmology, orthopedics, and electrophysiology tracks are relatively fast. High-value consumables in medical equipment procurement are mainly determined by hospital purchases, which focus more on cost-performance ratio. In contrast, the use of high-value consumables is mainly determined by clinical doctors. Companies need to train doctors and accumulate sufficient clinical data. Most domestic companies do not have the ability to carry out academic support overseas, so it is difficult for them to make high-value consumables international solely relying on dealers. As domestic enterprises gradually replace the share of imported goods in the domestic market, exploring the potential of overseas markets in the future has become an inevitable choice.
Relevant symbols:
Bullish tracks with low penetration rate, low localization rate, or excellent competitive pattern, such as APT Medical Inc. (688617.SH), WiseMicro Electronics (688351.SH), Shanghai MicroPort Endovascular MedTech (Group) Co., Ltd. (688016.SH), Sino Medical Sciences Technology Inc. (688108.SH), MicroPort Scientific Corporation (02172), Heart Copyright Medical (02291), LifeTech Sci (01302), etc.
The procurement is relatively sufficient, and the long-term penetration rate improvement track includes Lepu Medical (300003.SZ), Jiangxi Sanxin Medtec (300453.SZ), MicroPort (00853), Mountain Climbing Outside Mountain (688410.SH), Blue Sail Medical (002382.SZ), AK Medical (01789), Chunli Medical (688236.SH), Eyebright Medical Technology (Beijing) Co., Ltd. (688050.SH), Shanghai Sanyou Medical Co., Ltd. (688085.SH), ViHigh Orthopedic (688161.SH), OJ Bio (688613.SH), etc.
In terms of going global: Sino Medical Sciences Technology Inc. (688108.SH), MicroPort, AK Medical (01789), Chunli Medical, Mountain Climbing Outside Mountain, Era Angel (06699), Jafron Biomedical (300529.SZ), Xishan Technology (688576.SH), Blue Sail Medical (002382.SZ), etc.
Risk warning: the risk of performance falling short of expectations, the risk of deteriorating market competition pattern, and the risk of declining industry prosperity.
