Cinda Securities initiated coverage on AK MEDICAL (01789) with a "Buy" rating, highlighting the company's leadership in China's artificial joint sector. The brokerage noted that AK MEDICAL is poised for sustained growth in its orthopedic implant business, driven by domestic volume-based procurement (VBP) price adjustments and expanding overseas presence under a dual-brand strategy. Additionally, the company is actively building a digital orthopedic ecosystem, with its K3 surgical robot progressing toward commercialization, which could facilitate its strategic shift from an "implant manufacturer" to a "smart surgical solutions provider."
Key insights from Cinda Securities include:
1. **Domestic VBP Price Adjustments & International Expansion**: - In China, AK MEDICAL is capitalizing on VBP-driven volume growth, gradually replacing imported products while increasing hospital coverage and market share. The company secured higher prices in the 2024 VBP renewal, which is expected to bolster profitability. - Overseas, AK MEDICAL employs a dual-brand approach: leveraging the established "JRI" brand in premium markets (e.g., U.S., Europe) and the cost-competitive "AK" brand for emerging markets. This strategy is anticipated to sustain robust international revenue growth.
2. **Pioneering Digital Orthopedic Solutions**: - China's robot-assisted joint replacement penetration was just 0.03% in 2020 (vs. the U.S.), but Frost & Sullivan projects it could reach 3.05% by 2026, with the market growing from $14.8 million to $332 million (CAGR: 45.6%). - AK MEDICAL has developed a closed-loop digital orthopedic ecosystem spanning preoperative planning, intraoperative navigation, robotic precision surgery, and personalized implant placement. Its K3 knee surgical robot, launched in 2024, rivals Stryker’s Mako system while offering localized cost advantages, potentially accelerating adoption and enabling a "consumables + services + equipment" business model.
**Risks**: Potential VBP price cuts exceeding expectations, slower-than-expected new product adoption, and technological obsolescence.