Summary of Aikang Medical Conference Call Company Overview - Aikang Medical is a key player in the orthopedic device sector, focusing on innovative products, particularly in the spinal field, and has received the first domestic registration certificate for an innovative product in this area [1][3][4]. - The company was established in 2003 and has a history of innovation, including the launch of the first domestic knee joint product in 2004 and the first 3D printed product in 2015 [4][5]. Financial Performance - For the year 2023, Aikang Medical reported a revenue increase of approximately 4% year-on-year, reaching 1.09 billion RMB [19]. - The gross profit margin improved by 6%, totaling 674 million RMB, while net profit decreased by 11.1% to 182 million RMB [19][20]. - The knee joint segment saw a revenue contribution of approximately 310 million RMB, with a growth rate of 16.9% despite being part of a low-price bidding group [21]. - The spinal product revenue grew over 100%, attributed to the introduction of innovative 3D printed products [10]. Product Development and Innovation - Aikang Medical has a comprehensive product line that includes 3D printed products for various orthopedic applications, including knee, hip, and spinal products [5][11]. - The company has launched a digital orthopedic platform aimed at providing comprehensive solutions for doctors, integrating 3D printing and surgical navigation systems [11][29]. - In 2023, Aikang received 18 Class III medical device registration certificates, enhancing its product offerings [13]. Market Dynamics - The company has benefited from recent bidding processes, with its products entering the top 40% of pricing, allowing for advantageous distribution of remaining quantities [8][9][52]. - Aikang's market share in provincial hospitals increased from 8% in 2021 to 16% in 2023, indicating a shift towards higher-tier hospitals [9]. - The company is focusing on expanding its presence in overseas markets, which currently represent 20% of its revenue, with a compound annual growth rate of over 30% in recent years [15][23]. Strategic Outlook - Aikang aims for a revenue growth target of 30% in 2024 and 2025, with a focus on maintaining a net profit margin of around 20% [30][31]. - The company plans to leverage its manufacturing capabilities and innovative products to capture a larger share of both domestic and international markets [16][17]. - Aikang is positioned to benefit from the ongoing trend of domestic brands gaining market share from foreign competitors due to improved pricing and service offerings [42]. Operational Efficiency - The company reported an inventory turnover period of 424 days in 2023, which is expected to improve in 2024 as raw material consumption increases [27]. - Operating cash flow was reported at 34 million RMB, influenced by inventory purchases [28]. Conclusion - Aikang Medical is strategically positioned for growth in the orthopedic device market, with a strong focus on innovation, market expansion, and operational efficiency. The company is optimistic about its future performance, particularly in light of favorable bidding outcomes and increasing market share in higher-tier hospitals.

Investment Rating - The investment rating for the company is "Buy" [1][3]. Core Views - The report maintains a "Buy" rating, highlighting positive results from the national procurement renewal, which is expected to lead to a strong recovery in the company's core business. The forecasted EPS for 2024-2026 is maintained at 0.23, 0.33, and 0.44 yuan respectively [3][4]. - The company has successfully overcome the negative impacts from the low pricing in the first round of national procurement, with a slight increase in the procurement demand share to 15% compared to the first round in 2021. Key products have shown improved market positions, with the company maintaining the leading share in several categories [3][4]. - The new procurement results are expected to provide a competitive advantage, with significant price increases for key products compared to the first round. The average price difference has decreased significantly, allowing for better profit margins for distributors [3][4]. Financial Summary - The financial summary indicates a revenue forecast of 761 million, 1,052 million, 1,094 million, 1,422 million, 1,859 million, and 2,376 million yuan for the years 2024E to 2026E, with a year-on-year growth rate of 30% for 2024E [4]. - The gross profit is projected to be 499 million, 636 million, 674 million, 880 million, 1,153 million, and 1,476 million yuan for the same period, reflecting a strong recovery trajectory [4]. - Net profit forecasts are 93 million, 205 million, 182 million, 263 million, 370 million, and 495 million yuan, indicating a significant rebound from previous years [4]. Market Data - The current stock price is 6.00 HKD, with a market capitalization of 6,732 million HKD and a total share count of 1,122 million [1][5]. - The stock has traded within a range of 4.05 to 7.92 HKD over the past 52 weeks [5]. Procurement Results - The company achieved a procurement demand share of 14.2% for the ceramic-on-ceramic hip joint in the 2024 renewal, maintaining a strong position in the market [11]. - For the ceramic-on-polyethylene hip joint, the company secured a procurement demand share of 11.4%, indicating a solid competitive stance [12]. - The knee joint procurement results show a leading share of 15.7%, further solidifying the company's market leadership [14].

Financial Performance - The company achieved a revenue of RMB 1,093.9 million for the year ended December 31, 2023, representing a 4.0% increase compared to RMB 1,052.0 million in 2022[6]. - Gross profit for 2023 was RMB 674.5 million, up 6.0% from RMB 636.4 million in 2022[6]. - Net profit decreased by 11.1% to RMB 182.1 million in 2023 from RMB 204.8 million in 2022, primarily due to increased R&D and market expansion costs[6]. - For the full year 2023, the company achieved sales revenue of RMB 1,093.9 million, a 4.0% increase compared to the previous year, while net profit decreased by 11.1% to RMB 182.1 million[21]. - The revenue from hip and knee implant business was RMB 901.7 million in 2023, representing a decline of 2.1% year-on-year[22]. - The spinal and trauma implant products generated revenue of RMB 123.3 million, showing a significant increase of 105.4% year-on-year[26]. - Custom products and services revenue reached RMB 49.6 million, reflecting a growth of 5.6% compared to the previous year[27]. - Revenue from hip joint replacement implants was RMB 590.4 million, a decrease of 9.9% from RMB 655.0 million in 2022, primarily due to reduced surgical volumes influenced by anti-corruption actions[54]. - Revenue from knee joint replacement implants increased by 16.9% to RMB 311.4 million, up from RMB 266.4 million in 2022, driven by new products like unicondylar implants[54]. - Revenue from spinal and trauma implants surged by 105.4% to RMB 123.3 million, compared to RMB 60.0 million in 2022, due to the successful market acceptance of 3D printed spinal products[55]. Market Expansion and Product Development - The company is actively expanding its overseas market presence, resulting in significant revenue growth from international sales[6]. - The company launched several new products in 2023, including the HAUK single-compartment product and a 3D-printed hip product system, which received positive market feedback[35]. - The spinal business saw a significant increase, with 3D-printed spinal products entering 262 new hospitals in 2023, including 52 provincial hospitals, leading to rapid growth in surgical implants[36]. - The company expanded its overseas business, with joint ventures in Vietnam and Uzbekistan, achieving over 50% growth in the Southeast Asian market[39]. - The company is focusing on digital orthopedic technology, enhancing its capabilities in surgical planning, personalized surgical models, and robotic systems, aiming to capture more market share in high-end segments[42]. - The company is committed to maintaining its leadership position in the orthopedic industry and enhancing its image as an innovator through strategic product launches and collaborations with research institutions[44]. Regulatory Approvals and Market Position - The company received approvals for 18 new Class III medical device registrations from various national drug regulatory authorities, including 3D printed knee joints and hip joint surgical robots[19]. - The company obtained 18 new Class III medical device registrations in 2023, bringing the total to 88 approved by the National Medical Products Administration[28]. - The company achieved over 20% market share in the hip implant market in Beijing in 2023, despite the impact of nationwide anti-corruption actions[33]. Financial Position and Investments - The total assets of the company reached RMB 3,003.0 million in 2023, an increase from RMB 2,774.5 million in 2022[14]. - As of December 31, 2023, the company's cash and cash equivalents amounted to RMB 331.2 million, a decrease from RMB 1,083.3 million as of December 31, 2022[70]. - The net current assets as of December 31, 2023, were RMB 1,476.6 million, down RMB 152.4 million from RMB 1,629.0 million as of December 31, 2022, primarily due to investments in new factory construction[71]. - Total capital expenditures for the year ended December 31, 2023, were approximately RMB 230.8 million, mainly for factory construction, patent purchases, and equipment for production and R&D[74]. - As of December 31, 2023, the company had short-term bank loans of RMB 21.4 million and long-term borrowings of RMB 32.3 million, both used for new factory construction, with a debt-to-capital ratio of 2.2%[76]. Research and Development - Research and development expenses rose by 23.7% to RMB 137.1 million, compared to RMB 110.9 million in 2022, reflecting continued investment in innovation[67]. - Selling and distribution expenses increased by 21.5% to RMB 218.8 million, driven by market expansion and promotional activities[64]. Corporate Governance and Management - The company has a strong board of directors with members having extensive experience in healthcare and finance, including Dr. Wang Guowei and Mr. Jiang Zhiwu[91][94]. - The company has been expanding its leadership team with experienced professionals from various sectors, enhancing its operational capabilities[92][96]. - The management team has a strong educational background, with advanced degrees in business and finance, contributing to informed decision-making[89][93]. - The company emphasizes sustainable development and ESG (Environmental, Social, and Governance) practices, with board members holding relevant certifications[96][97]. Shareholder Information and Stock Options - The proposed final dividend is HKD 0.045 per ordinary share for the year ending December 31, 2023, down from HKD 0.060 in 2022[127]. - The total reserves available for distribution to equity shareholders as of December 31, 2023, amounted to RMB 9,844 million[136]. - The company has adopted a stock option plan and share incentive plan to reward directors and employees[139]. - The total number of stock options granted under the plan amounts to 91,620,253 shares, representing 8.21% of the existing issued share capital[170]. - The stock option plan aims to incentivize eligible participants to enhance performance efficiency and to attract and retain contributors to the group's long-term development[171]. - The company has implemented a share award scheme to reward eligible participants contributing to its growth and development[188]. - The total number of shares available for issuance under the share incentive plan is 6,524,000 shares, accounting for 0.58% of the total issued shares as of the report date[192].

Investment Rating - The report assigns a "Buy" rating to the company, with a target price of HKD 5.89 per share, compared to the current price of HKD 4.92 [3][13]. Core Views - The company's performance in 2023 met expectations, with total revenue of RMB 1.094 billion (YOY +4%) and a net profit of RMB 182 million (YOY -11.1%). The decline in net profit is attributed to increased R&D and market expansion expenses [2][8]. - The company has improved its market share in key segments, achieving over 20% market share in the joint implant market in Beijing and expanding its presence in Southeast Asia [2][8]. - The overall expense ratio has increased, with R&D expenses at 13% (YOY +2pp), management expenses at 12% (YOY +1pp), and sales expenses at 20% (YOY +3pp) [2][8]. Financial Forecast and Investment Recommendations - Revenue projections for 2024-2026 are RMB 1.421 billion, RMB 1.864 billion, and RMB 2.464 billion, respectively, with corresponding EPS of RMB 0.22, RMB 0.29, and RMB 0.42 [2][13]. - The expected growth rates for revenue are 30%, 31.1%, and 32.2% for the years 2024, 2025, and 2026, respectively [8][13]. - The report anticipates a PE ratio of 25X for 2024, reflecting the company's growth potential and comparable company valuations [12][13].

证券研究报告 | 2024年04月10日 爱康医疗（01789.HK） 买入 以数字骨科技术为引领，大力拓展海外市场 核心观点 公司研究·财报点评 2023年收入略增，脊柱及创伤植入物高速放量。2023年实现收入10.94亿 医药生物·医疗器械 元（+4.0%），归母净利润1.82亿（-11.1%）；其中下半年实现收入4.45 证券分析师：张超 证券分析师：张佳博 亿（-14.5%），归母净利润0.50亿（-37.1%）。2023年上半年病人就医数 0755-81982940 021-60375487 zhangchao4@guosen.com.cnzhangjiabo@guosen.com.cn 量显著提升，医院端骨科手术量在二季度迎来高峰，但三季度开展的全国医 S0980522080001 S0980523050001 药领域集中整治工作在短期内一定程度上影响了公立医院的手术量，以及创 基础数据 新性高附加值产品在医院的推广和应用。分品类来看，髋关节收入5.90亿 投资评级 买入(维持) （-9.9%），膝关节收入3.11亿（+16.9%），脊柱和创伤植入物收入1.23 合理估值 收盘价 5.41港元 亿 ...

[ 2T 0a 2b 4l 年e_S 0t 3o 月ckI 2n 6f 日o] 证券研究报告•2023年年报点评 当前价： 4.60港元 爱康医疗（1789.HK） 医疗保健 目标价： ——港元 业绩短期承压，看好 24 年重整旗鼓 投资要点 西南证券研究发展中心 [T ab事le件_S：u2m02m4a年ry3] 月26日公司发布公告，2023年实现营业收入10.9亿元（+3.8%）， [分Ta析bl师e_：Au杜th向or阳] 实现归母净利润1.8亿元（-11.1%），实现扣非归母净利润1.8亿元（-6.6%）。 执业证号：S1250520030002 电话：021-68416017  受医疗反腐影响，医院手术量下滑导致公司业绩短期承压。公司2023年收入端 邮箱：duxy@swsc.com.cn 增速减慢主要系2023年7月国家反腐政策出台，关节类高值耗材医院手术量有 所下降所致。利润端下滑主要系公司研发以及市场开拓投入增加所致。从盈利 [相Tab对le指_Q数u表ot现eP ic] 能力上看，公司2023年毛利率为61.7%（+1.2pp），净利率为16.6%（-2.9pp）， 爱康医疗 恒生指数 ...

股 票 研 究 [Table_industryInfo] 医药 [ Table_Main[爱I Tnaf 康bol]e 医_Ti疗tle]（ 1789） [评Tab级le_：Inv est] 增持 当前价格（港元）： 4.87 外部扰动影响业绩，2024 年增速有望回升 2024.03.27 海 ——爱康医疗2023 年报业绩点评 [ 交Ta易bl数e_M据a rket] 外 丁丹(分析师) 谈嘉程(分析师) 52周内股价区间（港元） 4.05-11.08 当前股本（百万股） 1,122 公 0755-23976735 021-38038429 当前市值（百万港元） 5,464 司 dingdan@gtjas.com tanjiacheng@gtjas.com 证书编号 S0880514030001 S0880523070004 （ 中 本报告导读： 国 受外部扰动影响公司2023H2业绩承压，2024年有望重返增长轨道，维持增持评级。 香 摘要： 港 [维Ta持ble增_S持um评m级ar。y]考 虑到2023H2 外部扰动对公司业务开拓节奏的影响，下 ） 调2024-2025 年预测EPS 为0.23/0 ...

Revenue and Profit Performance - Revenue for the year ended December 31, 2023, reached RMB 1,093.9 million, a 4.0% increase compared to 2022[2] - Net profit for 2023 decreased by 11.1% to RMB 182.1 million, primarily due to increased R&D and market expansion investments[2] - Total revenue from external customers reached RMB 1,093,862 thousand in 2023, up from RMB 1,052,047 thousand in 2022, a growth of 4.0%[15][19] - Total reported segment profit was RMB 232,744 thousand in 2023, slightly down from RMB 237,400 thousand in 2022[19] - Revenue for the year ended December 31, 2023, was RMB 1,093.9 million, a 4.0% increase compared to RMB 1,052.0 million in 2022[53] - Net profit for the year ended December 31, 2023, was RMB 182.1 million, a decrease of 11.1% compared to RMB 204.8 million in 2022[53] - Total revenue for the year ended December 31, 2023, was RMB 1,093.862 million, an increase of 4.0% compared to RMB 1,052.047 million in 2022[62] - Gross profit for 2023 was RMB 674.5 million, up 6.0% from RMB 636.4 million in 2022, with gross margin improving to 61.7% from 60.5%[63] Overseas and Domestic Revenue - Overseas revenue saw significant growth, contributing to the overall revenue increase despite a decline in domestic hospital surgeries due to anti-corruption actions[2] - Revenue from external customers in the UK increased to RMB 102,497 thousand in 2023 from RMB 77,844 thousand in 2022, a growth of 31.7%[19] - Revenue from other countries (excluding China and the UK) rose to RMB 171,954 thousand in 2023 from RMB 123,254 thousand in 2022, a growth of 39.5%[22] - Overseas sales revenue for the year ended December 31, 2023, was RMB 227.1 million, a significant increase of 37.1% compared to the previous year[60] - Domestic sales revenue for the year ended December 31, 2023, was RMB 866.7 million, a decrease of 2.2% compared to the previous year[60] Product Revenue Breakdown - Revenue from hip replacement implants decreased to RMB 590,396 thousand in 2023 from RMB 654,999 thousand in 2022, a decline of 9.9%[15] - Revenue from knee replacement implants increased to RMB 311,351 thousand in 2023 from RMB 266,415 thousand in 2022, a growth of 16.9%[15] - Revenue from spine and trauma implants surged to RMB 123,268 thousand in 2023 from RMB 60,006 thousand in 2022, a significant increase of 105.4%[15] - Revenue from spine and trauma implants for the year ended December 31, 2023, was RMB 123.3 million, a significant increase of 105.4% compared to RMB 60.0 million in 2022[57] - Revenue from knee replacement implants for the year ended December 31, 2023, was RMB 311.4 million, an increase of 16.9% compared to RMB 266.4 million in 2022[56] - Revenue from hip replacement implants for the year ended December 31, 2023, was RMB 590.4 million, a decrease of 9.9% compared to RMB 655.0 million in 2022[56] - Revenue from customized products and services for the year ended December 31, 2023, was RMB 49.6 million, an increase of 5.6% compared to RMB 47.0 million in 2022[58] - Revenue from other products (surgical instruments and third-party orthopedic products) for the year ended December 31, 2023, was RMB 19.3 million, a decrease of 18.7% compared to RMB 23.7 million in 2022[59] R&D and Innovation - R&D expenses increased to RMB 137.1 million in 2023, up from RMB 110.9 million in 2022[4] - The company obtained 18 new Class III medical device registrations from the National Medical Products Administration (NMPA) in 2023, including 3D-printed knee joint prostheses, 3D-printed second-generation interbody fusion devices, and 3D-printed customized long-segment bone and thoracolumbar prostheses[44] - As of December 31, 2023, the company held 88 Class III medical device registrations from the NMPA, 15 CE certifications from European regulatory agencies, and 2 certifications from the U.S. Food and Drug Administration[44] - The company's iBot hip surgery robot received regulatory approval, forming a comprehensive digital orthopedic solution from 3D printing to surgical navigation and robotic systems[45] - The company holds 304 invention patents, 404 utility model patents, and 31 authorized PCT patents as of December 31, 2023[45] - The company's Apollo self-stabilizing vertebral body product, the first 3D-printed self-stabilizing vertebral body product in China, received positive market feedback[48] - The company's Osteo Match system, featuring bone modulus-matched spinal fusion implants, is the world's first biomechanically matched spinal fusion system[48] - The company's digital orthopedic business has developed capabilities in surgical planning, personalized surgical models, surgical guides, and robotic-assisted joint replacement systems[50] - R&D expenses grew by 23.7% to RMB 137.1 million in 2023, reflecting continued investment in new product development and team expansion[67] Financial Position and Assets - Total assets as of December 31, 2023, amounted to RMB 2,504.9 million, compared to RMB 2,338.1 million in 2022[7] - Cash and cash equivalents decreased to RMB 331.2 million in 2023 from RMB 625.8 million in 2022[6] - Inventory increased to RMB 595.5 million in 2023, up from RMB 402.3 million in 2022[6] - The company's equity attributable to shareholders totaled RMB 2,391.9 million as of December 31, 2023, compared to RMB 2,243.8 million in 2022[9] - Total reported segment assets increased to RMB 2,549,016 thousand in 2023 from RMB 2,305,637 thousand in 2022[19] - Cash and cash equivalents decreased to RMB 757.3 million in 2023 from RMB 1,083.3 million in 2022, partly due to investments in new factory construction[70] - Net current assets decreased to RMB 1,476.6 million in 2023 from RMB 1,629.0 million in 2022, primarily due to new factory construction[71] - Total capital expenditure for 2023 was approximately RMB 230.8 million, mainly allocated to factory construction, patent purchases, and production equipment[73] - The company's capital-to-debt ratio stood at 2.2% as of December 31, 2023, with loans used for new factory construction[75] Dividends and Shareholder Returns - The company proposed a final dividend of 4.5 HK cents per share for the year ended December 31, 2023[3] - A final dividend of 4.5 HK cents per share was proposed for 2023, totaling RMB 45,750 thousand, compared to 6.0 HK cents per share in 2022[32] - The company paid a final dividend of 6.0 HK cents per share for the previous fiscal year in 2023, amounting to RMB 61,509 thousand[33] - A final dividend of 4.5 HK cents per ordinary share is proposed for the year ended December 31, 2023, down from 6.0 HK cents in 2022[84] Market Expansion and Strategy - The company achieved a market share of over 20% in joint implantations in Beijing in 2023[46] - The company's joint business expanded to Vietnam and Uzbekistan, with Southeast Asian market growth exceeding 50% in 2023[49] - The company entered 262 new hospitals with its 3D-printed spine products in 2023, including 52 provincial-level hospitals[48] - Sales and distribution expenses rose by 21.5% to RMB 218.8 million in 2023, driven by increased market expansion and promotional activities[65] Employee and Operational Costs - Employee costs rose to RMB 254,964 thousand in 2023, compared to RMB 214,178 thousand in 2022, driven by higher salaries, wages, and benefits[24] - Inventory costs for 2023 were RMB 435,315 thousand, slightly up from RMB 426,461 thousand in 2022, including employee costs, depreciation, and amortization expenses[25] - Employee headcount increased to 1,052 in 2023 from 1,034 in 2022, with total employee compensation rising to RMB 255.0 million from RMB 206.0 million[77] Tax and Other Financials - Tax expenses for 2023 totaled RMB 49,013 thousand, up from RMB 35,518 thousand in 2022, with current tax provisions increasing to RMB 40,623 thousand[25] - The company's Chinese subsidiaries benefit from a preferential corporate income tax rate of 15% due to their high-tech enterprise status[26] - Other income net increased to RMB 26,370 thousand in 2023, up from RMB 11,193 thousand in 2022, with government subsidies contributing RMB 19,944 thousand[23] - Other income for 2023 increased to RMB 26.4 million from RMB 11.2 million in 2022, primarily due to higher government subsidies[64] Corporate Governance and Leadership - The company's chairman and CEO roles are both held by Mr. Li Zhijiang, deviating from the corporate governance code due to his extensive industry experience and leadership capabilities[78] - The board of directors includes executive directors Mr. Li Zhijiang, Ms. Zhang Bin, Mr. Zhang Chaoyang, and Ms. Zhao Xiaohong, non-executive director Dr. Wang Guowei, and independent non-executive directors Mr. Jiang Zhiwu, Dr. Li Shurong, and Mr. Eric Wang[86] Audits and Compliance - The company's consolidated financial statements for the year ended December 31, 2023, were reviewed by KPMG, with figures matching the audited financial statements[79] - The company's audit committee has reviewed the annual results for the year ended December 31, 2023[80] - No significant acquisitions or disposals of subsidiaries, associates, or joint ventures were made during the year[82] - The company's public shareholding remained at least 25% of the total issued share capital throughout the year[82] Shareholder Meetings and Reporting - The company will hold its Annual General Meeting on June 18, 2024[83] - The company will suspend share transfer registration from June 13 to June 18, 2024, for the AGM and from June 26 to June 28, 2024, for the final dividend[84] - The annual report for 2023 will be published on the company's website and the HKEX website[85]

Financial Performance - The company reported a revenue of approximately RMB 648.7 million for the first half of 2023, representing a 22.1% increase compared to RMB 531.2 million in the same period of 2022[5]. - Gross profit for the first half of 2023 was approximately RMB 401.6 million, up 18.6% from RMB 338.5 million in the previous year[5]. - Net profit for the period was approximately RMB 132.6 million, reflecting a 5.2% increase from RMB 126.0 million in the same period last year[5]. - Operating profit increased to RMB 143,710 thousand, a rise of 6.9% from RMB 134,843 thousand year-over-year[15]. - Total comprehensive income for the period was RMB 150,284 thousand, up from RMB 129,288 thousand in 2022, marking a 16.3% increase[15]. - Basic and diluted earnings per share for the period were RMB 0.12, up from RMB 0.11 in the same period last year[15]. - The pre-tax profit for the six months ended June 30, 2023, was RMB 132,574,000, an increase from RMB 126,033,000 for the same period in 2022, representing a growth of approximately 4.3%[68]. Revenue Breakdown - Revenue from hip and knee joint products reached approximately RMB 552.5 million, a year-on-year increase of 21.2%[8]. - Revenue from spinal and trauma implant products was approximately RMB 50.2 million, showing a 10.8% increase compared to the previous year[9]. - Revenue from knee joint replacement implants surged by 64.7% to approximately RMB 211.0 million, while revenue from hip joint replacement implants grew by 4.2% to approximately RMB 341.5 million[20]. - Overseas revenue increased significantly by 78.3% to approximately RMB 113.5 million, driven by active market expansion efforts[24]. - Customized products and services generated approximately RMB 27.8 million in revenue for the first half of 2023, representing a year-on-year increase of 31.5%[10]. Product Development and Innovation - The company launched and introduced five new products in the first half of 2023, enhancing its innovative product offerings[6]. - The company introduced several innovative products in the first half of 2023, including the Osteo Match interbody fusion device and the Apollo self-stabilizing artificial vertebra[11]. - The company launched the Visual Treatment Solution (VTS) system, promoting digital orthopedic technology applications across various regions[14]. - The company obtained two new customized product registration certificates in the first half of 2023, enhancing its 3D printing orthopedic solutions[10]. - The company has established strategic collaborations to build 3D printing joint laboratories, enhancing its research and development capabilities[12]. Market Strategy and Expansion - The company aims to leverage its advanced 3D printing technology and digital orthopedic technology platforms to capture more market share in the orthopedic industry[6]. - The implementation of the volume-based procurement policy has accelerated domestic brand market share growth, benefiting the company[6]. - The company is focused on expanding its coverage in provincial top-tier hospitals, enhancing its market presence[7]. - The orthopedic industry is expected to continue recovering from the impacts of the COVID-19 pandemic, maintaining a relatively fast growth rate[6]. - The company is focusing on innovative solutions to adapt to changes in the industry landscape following centralized procurement[14]. Financial Position and Cash Flow - As of June 30, 2023, the group had cash and cash equivalents of approximately RMB 525.8 million, down from RMB 1,083.3 million as of December 31, 2022, reflecting a decrease in liquidity[33]. - The net current asset value as of June 30, 2023, was approximately RMB 1,487.7 million, a decrease of about RMB 141.3 million from RMB 1,629.0 million as of December 31, 2022, mainly due to investments in new facility construction[34]. - Total capital expenditures for the six months ended June 30, 2023, were approximately RMB 113.1 million, primarily for facility construction, patent purchases, and equipment for production and R&D[36]. - The group recorded a net foreign exchange gain of approximately RMB 3.4 million for the six months ended June 30, 2023, down from RMB 7.3 million for the same period in 2022, indicating increased foreign exchange risk exposure[35]. - Operating cash flow for the six months ended June 30, 2023, was RMB 14,358 thousand, a significant decrease from RMB 214,786 thousand in the same period of 2022[53]. Expenses and Liabilities - Sales costs rose by 28.3% to approximately RMB 247.1 million, primarily due to increased sales volume[25]. - The company’s sales and distribution expenses increased by 17.7% to approximately RMB 117.4 million, attributed to market development and new product training[28]. - General and administrative expenses for the six months ended June 30, 2023, were approximately RMB 75.2 million, an increase of 37.8% compared to RMB 54.5 million for the same period in 2022, primarily due to increased personnel costs and credit loss provisions[29]. - Research and development expenses for the six months ended June 30, 2023, were approximately RMB 66.3 million, a significant increase of 21.9% from RMB 54.4 million for the same period in 2022, driven by continued investment in R&D and new product development[30]. - Total liabilities as of June 30, 2023, were RMB 639,565 thousand, compared to RMB 436,384 thousand at the end of 2022, reflecting a significant increase of 46.6%[49]. Shareholder Information and Stock Options - The company has granted 3,400,000 share options under the pre-IPO share option scheme, representing approximately 0.30% of the issued shares[103]. - The total number of stock options granted under the pre-IPO stock option plan as of June 30, 2023, is 89,921,217 shares, representing 8.02% of the existing issued share capital[109]. - The company aims for a revenue increase of 30% or more in the relevant financial year for the share options to vest[104]. - The company has established a performance evaluation plan for the relevant financial year as a condition for the share options to vest[105]. - The company has no other categories of persons granted stock options that require disclosure under the listing rules[115]. Corporate Governance - The company has adopted the standard code of conduct for securities transactions as per the listing rules, with all directors confirming compliance for the six months ending June 30, 2023[127]. - The company has adhered to all applicable corporate governance code provisions, except for the separation of roles between the chairman and CEO, which are held by the same individual[128]. - The audit committee, consisting of independent non-executive directors, has reviewed the interim report for the six months ending June 30, 2023, and found it to be in accordance with applicable accounting standards[129]. - All relevant information required by the listing rules has been disclosed in the interim report for the six months ended June 30, 2023[133].

Financial Performance - The company achieved revenue of approximately RMB 648.7 million for the six months ended June 30, 2023, representing a significant increase of 22.1% compared to RMB 531.2 million in the same period of 2022[1]. - Gross profit for the same period was RMB 401.6 million, up 18.6% from RMB 338.5 million year-on-year[2]. - Net profit for the period increased by 5.2% to RMB 132.6 million, compared to RMB 126.0 million in the previous year[1]. - Basic and diluted earnings per share were both RMB 0.12, an increase from RMB 0.11 in the prior year[2]. - The company reported a significant increase in overseas revenue due to proactive market expansion efforts[1]. - Revenue from hip joint replacement implants was RMB 341,496,000, up 4.9% from RMB 327,864,000 in the previous year[9]. - Revenue from knee joint replacement implants increased significantly by 64.6% to RMB 210,959,000 from RMB 128,124,000[9]. - Revenue from hip and knee implant products reached approximately RMB 552.5 million, a year-on-year increase of 21.2%[26]. - Revenue from spinal and trauma implant products was approximately RMB 50.2 million, reflecting a 10.8% increase compared to the previous year[28]. - The company reported a profit increase of 5.2% for the six months ended June 30, 2023, attributed to the overall revenue growth[36]. Assets and Liabilities - Cash and cash equivalents decreased to RMB 525.8 million as of June 30, 2023, down from RMB 625.8 million at the beginning of the year[5]. - Total assets less current liabilities amounted to RMB 2,460.2 million, compared to RMB 2,338.1 million at the end of 2022[4]. - The company’s inventory increased to RMB 538.9 million from RMB 402.3 million year-on-year, indicating a growth in stock levels[3]. - Trade receivables rose to RMB 598.7 million, up from RMB 467.1 million, reflecting increased sales activity[3]. - The total assets of the company as of June 30, 2023, were RMB 2,744,741,000, an increase from RMB 2,305,637,000 as of December 31, 2022[12]. - Trade payables totaled RMB 277.64 million as of June 30, 2023, up from RMB 155.17 million at the end of 2022[21]. - The net current assets as of June 30, 2023, were approximately RMB 1,487.7 million, a decrease of approximately RMB 141.3 million from RMB 1,629.0 million as of December 31, 2022, mainly due to investments in new factory construction[50]. Research and Development - Research and development expenses increased by 21.9% to approximately RMB 66.3 million, reflecting the company's commitment to innovation and product development[46]. - The company launched several innovative products in the spine and trauma fields based on 3D printing technology, including the Osteo Match interbody fusion device and the Apollo self-stabilizing artificial vertebra[30]. - The company has obtained 83 Class III medical device registrations from the National Medical Products Administration, including 17 for 3D printed products[31]. - The company introduced the Visual Treatment Solution (VTS) system, the first domestic joint replacement visualization intelligent assistance system, promoting digital orthopedic technology[33]. Market Expansion and Strategy - The company expanded its market presence by opening nearly 200 new spine business hospitals in the first half of 2023, with about 30 being provincial and national hospitals[32]. - The company is focusing on enhancing its market share in national and provincial hospitals, with a significant increase in surgical procedures performed[32]. - The orthopedic industry is expected to recover and maintain rapid growth levels post-COVID-19, with the company aiming to strengthen its market leadership through advanced R&D capabilities and 3D printing technology[34]. - The company has established partnerships with multiple key hospitals to develop customized orthopedic solutions using 3D printing technology[28]. Financial Management - The company reported a net financial income of approximately RMB 14.3 million, a slight decrease from RMB 14.6 million in the previous year, influenced by interest income and foreign exchange fluctuations[47]. - Income tax expense for the six months ended June 30, 2023, was approximately RMB 25.4 million, an increase of 8.5% compared to RMB 23.4 million for the same period in 2022, primarily due to an increase in profit before tax[48]. - The group recorded a net foreign exchange gain of approximately RMB 3.4 million for the six months ended June 30, 2023, down from RMB 7.3 million for the same period in 2022[51]. - The total employee compensation for the six months ended June 30, 2023, was approximately RMB 125.1 million, an increase from RMB 100.2 million for the same period in 2022, attributed to an increase in employee numbers[56]. Capital Expenditure - The company acquired property, plant, and machinery at a total cost of RMB 109.68 million for the six months ended June 30, 2023, compared to RMB 23.56 million in the same period last year[19]. - Total capital expenditure for the six months ended June 30, 2023, was approximately RMB 113.1 million, primarily for factory construction, patent purchases, and equipment for production and R&D[52]. Dividend and Contingent Liabilities - The group does not recommend any interim dividend for the six months ended June 30, 2023, consistent with the previous year[62]. - The group has no significant contingent liabilities as of June 30, 2023, and did not engage in any major acquisitions or disposals during the period[55].