20220915-招银国际-鹰瞳科技-B-02251.HK-Expect_recovery_from_2H22_6页_983kb

Airdoc Technology (2251 HK) Summary

Core Content

Airdoc Technology, listed on the Hong Kong Stock Exchange, has experienced a decline in first-half 2022 (1H22) revenue and gross profit due to the negative impact of the pandemic. The company primarily offers AI-based software solutions for ophthalmic examinations, which require in-person interactions, making them vulnerable to lockdowns. The number of detection cases dropped by 34.8% YoY to 1.63 million, but the company expects a recovery in the second half of 2022 as restrictions eased.

Main Points

• Revenue and Profit Decline in 1H22:
  Airdoc's revenue in 1H22 fell by 24.4% YoY to RMB37.4 million, and gross profit dropped by 30.4% YoY to RMB22.1 million. The gross margin also decreased from 64.1% in 1H21 to 59.0% in 1H22.

• Detection Cases Recovery:
  The number of detection cases was significantly affected by the pandemic but has rebounded since June. Airdoc expects continued recovery in the second half of 2022 as offline ophthalmic examination activities resume.

• Sales Expansion and Channel Growth:
  Airdoc expanded its sales and marketing team to 161 employees and established an overseas sales team covering eight countries. In 1H22, the company provided AIFUNDUS 1.0 to 41 hospitals and 50 primary healthcare institutions, with service sites increasing by over 230% YoY in medical institutions, 470% YoY in pharmacies, and 17% YoY in optometry centers.

• Product Development:
  AIFUNDUS 2.0 completed clinical trials with an expanded indication coverage, including hypertensive retinopathy, retinal vein occlusion, and age-related macular degeneration. The company plans to apply for a Class III Medical Device Certificate in 3Q22. The myopia control & prevention solution is set to launch in September 2022, which could drive new business opportunities.

• Valuation and Investment Rating:
  The company's target price was reduced from HK$74.54 to HK$36.34, based on a 9-year DCF model with a WACC of 12.6% and a terminal growth rate of 2.0%. The current price is HK$12.90, indicating a potential upside of 181.71%. The investment rating is maintained as BUY, reflecting the expected recovery and growth potential.

Key Financial Metrics

Shareholding and Market Data

• Market Cap: HK$1,346.4 million
• Total Issued Shares: 103.6 million
• Shareholding Structure:
  • Dalei Zhang: 16.7%
  • Fosun International: 9.9%

Share Performance

Analyst Ratings and Disclosures

• CMBIGM Rating: BUY
• Target Price: HK$36.34 (Previous: HK$74.54)
• Analyst Certification: The views expressed accurately reflect the analyst's personal views, and no part of the compensation is related to the report.
• Analyst Conflicts of Interest: The analyst may have a position or make markets in the securities covered in this report, and is not liable for any loss or damage resulting from reliance on the report.

Valuation and Sensitivity Analysis

• DCF Valuation (RMB mn):

  • 2022E: 1,720
  • 2023E: 1,822
  • 2024E: 3,199
  • 2025E: 5,307
  • Terminal growth rate: 2.0%
  • WACC: 12.6%
  • Terminal value (RMB mn): 5,307

• Sensitivity Analysis (HK$):

  • Terminal growth rate:
    • 3.0%: 43.82
    • 2.5%: 42.16
    • 2.0%: 36.34
    • 1.5%: 39.33
    • 1.0%: 38.12

Disclaimer

This report is for informational purposes only and does not constitute investment advice. It is not suitable for all investors and should not be relied upon without independent evaluation. CMBIGM is not liable for any losses incurred from using the information in this report. Investors are encouraged to consult with a professional financial advisor.

Legal and Regulatory Information

• United Kingdom: This report is only provided to persons falling within Article 19(5) of the Financial Services and Markets Act 2000 or Article 49(2) (a) to (d) of the Order.
• United States: CMBIGM is not a registered broker-dealer in the U.S. and the report is only for "major US institutional investors."
• Singapore: This report is distributed by CMBISG, an Exempt Financial Adviser, and is subject to Singapore's Financial Advisers Act and regulations. It is only for Accredited Investors, Expert Investors, or Institutional Investors.

Summary of Key Information

• Revenue Recovery: Expected to rebound in 2H22 due to easing of pandemic restrictions.
• Sales Expansion: Strengthened sales and marketing team, expanded sales channels, and increased service sites.
• Product Development: AIFUNDUS 2.0 is in clinical trials with broader applications, and myopia control & prevention solution is planned for launch in September 2022.
• Valuation: Reduced target price due to updated DCF model, with a BUY rating based on expected growth.
• Financial Health: Net profit remains negative, but the company has a strong cash position and is expanding its operations.