Shandong Weigao Group Medical Polymer Company (1066) H2 2023 earnings summary

Executive summary

• 2023 revenue was RMB13.229bn, down 3.8% YoY, or up 1.0% excluding 2022 epidemic-prevention revenue; operating cash flow rose 5% to RMB2.8bn and free cash flow reached a record RMB2.2bn.

• Main-product sales volumes continued to grow over 20%, while centralized volume-based procurement weighed on orthopedic revenue and margins in several segments.

Financial highlights

• Revenue was RMB13.229bn versus restated RMB13.747bn in 2022, down 3.8% reported and up 1.0% excluding 2022 epidemic-prevention-related revenue.

• Net profit attributable to shareholders was RMB2.002bn, down 27.6%; adjusted net profit was RMB1.983bn, down 28.8%, or RMB1.997bn excluding exchange gains and losses, down 25.1%.

• Segment operating profit totaled RMB2.575bn versus restated RMB3.505bn; medical devices contributed RMB1.054bn, pharma packaging RMB812mn, interventional RMB515mn, blood management RMB120mn and orthopedics RMB74mn.

• Overseas revenue was RMB3.397bn, up 7% YoY and 25.7% of total revenue; R&D expense was RMB593mn, up 7%, or 4.5% of sales.

Outlook and guidance

• 2024 orthopedic targets: raise per-capita output value 5%, reduce manufacturing cost 5% and move 80% of manufacturing operations online.

• Orthopedics targets 30 Class III and 20 Class II product registration certificates in 2024, with each R&D project planned to exceed 80% completion.

• Anesthesia-machine registrations are expected in mid-2024; ventilators, monitors and infusion pumps are also in development.

• Strategic goal: achieve a globalization rate above 50% within 10 years; plans include expanding into new product areas and overseas markets.