CICC: Maintains MICROPORT (00853) Outperform Rating with Target Price of HK$17

Stock News
Sep 02

CICC released a research report maintaining its net profit forecast for MICROPORT (00853) at -$0.39/$0.74 billion USD for 2025/26, keeping the outperform rating unchanged. The firm maintains its target price of HK$17 based on DCF model (WACC 8.5%, perpetual growth rate 1.3%), representing 40% upside potential from current price.

The company announced 1H25 results with revenue of $548 million USD, down 2% year-over-year; net loss attributable to parent company of $47 million USD compared to $97 million USD in the same period last year, representing a 52% reduction in losses. Despite slight pressure on the revenue side, profit-side loss narrowing exceeded the firm's expectations due to good expense control, foreign exchange gains, and asset disposal contributions.

CICC's main views are as follows:

**Revenue pressure across major business segments in the first half** 1) Coronary revenue declined 2.1% year-over-year, with domestic revenue essentially flat. Balloon and accessory revenues increased 38% and 21% respectively year-over-year; overseas revenue fell 10% year-over-year due to Middle East conflicts and channel adjustments. 2) Orthopedic revenue declined 3.7% year-over-year, cardiac rhythm management revenue declined 1.4% year-over-year. 3) Affected by volume-based procurement or price reductions, aortic and peripheral revenue declined 9.2% year-over-year, neuro intervention revenue declined 6.2% year-over-year. 4) Structural heart disease revenue increased 2.7% year-over-year, surgical robotics revenue increased 77.0% year-over-year, and surgical revenue increased 42.8% year-over-year.

Additionally, the group's overseas business revenue increased 57.3% year-over-year to $60 million USD. The firm expects that with the easing of overseas geopolitical conflicts and stabilization of domestic volume-based procurement, the company's various businesses may show good recovery trends in the second half.

**Smooth loss reduction across business segments** In the first half, orthopedic segment net losses narrowed 57.9% year-over-year, with EBITDA increasing 28.5% year-over-year. Cardiac rhythm management business achieved positive EBITDA. HeartCare Medical's net losses narrowed 96.2% year-over-year, while MicroPort Robotics' net losses narrowed 58.9% year-over-year.

At the overall company level, total three expense categories decreased 14.5% year-over-year, with operating expense ratio declining 8.1 percentage points year-over-year. R&D expense ratio decreased from 20.6% to 13.2%. Additionally, the company continued to divest non-core businesses, generating $26 million USD in positive returns. The company's overall EBITDA increased to $128 million USD (compared to $59 million USD in 1H24).

**Business reorganization plans** According to the announcement, in July 2025, the company announced that the board is considering a non-binding proposal regarding strategic reorganization of the cardiac rhythm management business. If successful, the cardiac rhythm management business may be merged with MicroPort CardioFlow's business. (As of 1H25, the company bears share repurchase obligations of $254 million USD arising from the cardiac rhythm management business.)

Additionally, the company plans to sell certain properties, equity method investees, or other assets, and is negotiating with multiple potential investors for direct investment in the company's subsidiaries or other assets. The firm believes these multiple activities may help improve the group's debt and cash flow situation.

**Risk warnings:** Volume-based procurement price reductions exceeding expectations, tariff impacts, geopolitical conflicts affecting overseas business, deteriorating competitive landscape, R&D failures, and new product promotion falling short of expectations.

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