20211216-招银国际-鹰瞳科技-B-02251.HK-Pioneer_in_AI-based_medical_imaging_industry_51页_2mb

Airdoc Technology (2251 HK) Summary

Core Content

Airdoc Technology (2251 HK) is a leading player in the AI-based medical imaging industry in China, offering integrated solutions that combine hardware, software, algorithms, and services. The company is recognized as a pioneer in this field, with its first NMPA-approved Class III AI-empowered retina-based auxiliary diagnosis product, Airdoc-AIFUNDUS (1.0), which assists in the early detection and diagnosis of diabetic retinopathy. The company has also developed a comprehensive database of approximately 3.7 million real-world retinal images, which has been crucial in enhancing its AI algorithms and maintaining a competitive edge.

Main Points

• Market Leadership: Airdoc is a market leader in providing integrated AI-empowered retina-based solutions, leveraging retinal imaging, multimodal data analyses, and AI deep learning algorithms to offer non-invasive, accurate, fast, and scalable detection and diagnosis.

• Product Pipeline: Airdoc has a rich pipeline of AI-based medical imaging products and health risk assessment solutions. These include:

  • Airdoc-AIFUNDUS (1.0): Approved for diabetic retinopathy diagnosis.
  • Airdoc-AIFUNDUS (2.0): Expected to be approved by 2022E for hypertensive retinopathy, retinal vein occlusion, and AMD.
  • Airdoc-AIFUNDUS (3.0): Expected to be approved by 2024E for pathological myopia and retinal detachment.
  • Glaucoma and cataracts detection SaMDs have also received regulatory approvals and applications.

• Hardware Development: Airdoc has developed three proprietary, fully automated fundus cameras:

  • AI-FUNDUSCAMERA-P: Received Class II certificate in March 2021.
  • AI-FUNDUSCAMERA-D: In R&D, expected to receive Class II certificate in Q2 2022E.
  • AI-FUNDUSCAMERA-M: In R&D, expected to apply for Class II certificate in Q4 2023E.

• Market Growth: F&S forecasts the AI-based medical imaging market in China to grow at a CAGR of 76.7% from RMB0.3bn in 2020 to RMB92.3bn in 2030E. This growth is driven by:

  1. Population aging and the rise in chronic diseases.
  2. Increasing penetration in both medical and consumer healthcare.
  3. High unmet medical needs for accurate AI-based diagnosis.

• Revenue Projections: Airdoc's revenue is expected to grow at a CAGR of 112% from FY21E to FY23E, reaching RMB118mn, RMB239mn, and RMB451mn respectively. The company is projected to record net losses of RMB99mn, RMB146mn, and RMB155mn for the same periods.

• Valuation: The company is initiated at BUY with a target price of HK$95.32, derived from a 10-year DCF model using a WACC of 11.4% and a terminal growth rate of 3.0%.

• Health Risk Assessment Solutions: Airdoc has developed solutions for a variety of health risks, including retinal abnormalities, cardiovascular diseases, anemia, and others. These are marketed to hospitals, community clinics, insurance companies, optometry centers, and pharmacies, with plans to expand coverage further.

Key Information

• Investment Thesis: Airdoc is a first-mover in the AI-based medical imaging market, offering non-invasive, accurate, and scalable solutions for chronic disease detection and health risk assessment. Its integrated approach and strong R&D capabilities position it well for market growth.

• Financial Highlights:

  • Revenue (RMB mn): 30 (FY19A), 48 (FY20A), 118 (FY21E), 239 (FY22E), 451 (FY23E)
  • YoY Growth (%): N/A, 57, 148, 102, 89
  • Net Loss (RMB mn): -87 (FY19A), -80 (FY20A), -99 (FY21E), -146 (FY22E), -155 (FY23E)
  • P/S Ratio: 116 (FY19A), 74 (FY20A), 30 (FY21E), 15 (FY22E), 8 (FY23E)
  • P/B Ratio: N/A, N/A, 2 (FY21E), 2 (FY22E), 3 (FY23E)
  • ROE (%): N/A, -19 (FY20A), -6 (FY21E), -10 (FY22E), -12 (FY23E)

• Investment Risks:

  1. Future growth is heavily dependent on the success of its product portfolio.
  2. Limited marketing and sales experience.
  3. Reliance on a small number of major customers.
  4. Dependence on third-party OEMs for supply.

Strategic Advantages

• Proprietary Technology: Airdoc has a strong IP portfolio with 134 patents and six PCT applications.
• Comprehensive Database: A vast database of labeled retinal images enhances the accuracy of its AI algorithms.
• Multi-Channel Commercialization: The company has a diverse customer base, including hospitals, clinics, insurance companies, and pharmacies.
• Regulatory Expertise: Airdoc has successfully navigated regulatory approvals, including Class III and Class II medical device certifications.

Conclusion

Airdoc Technology is positioned as a leader in the AI-based medical imaging industry, with a strong product pipeline, robust R&D capabilities, and a diverse set of integrated solutions. Its ability to address unmet medical needs through accurate, scalable, and cost-effective AI-based tools, combined with its regulatory and technological advantages, supports its growth trajectory and long-term value proposition. Despite current net losses, the company's strong growth potential and market leadership make it an attractive investment opportunity.