In 2022, Peijia completed 1,200+ TAVR implantation in China, accounting for c.14% market share, according to the management.Peijia’s 2022 revenue was c.RMB250m, with c.RMB110m and RMB140m from TAVR and neurointerventional, respectively. Besides, Peijia presented pipeline progress of its 3rd generation TAVR, TEER, TMVR products, etc. in its R&D day. We expect intensified competition among TAVR players in the short term, leading to higher selling and marketing expenses in 2023-24E; however, we like Peijia for its solid execution and expect its 3rd TAVR and TMVR products to launch in 2025 and 2026, respectively. We upgrade our rating to BUY and revise up our 12-month TP to HK$13.50, mainly due to higher contribution from 3rd TAVR and TMVR as well as TMVr from 2025 onwards.
　　Key Factors for Rating
　　Despite COVID-19 in 2022, Peijia delivered in-line results: According to the management, Peijia’s 2022 revenue was c.RMB250m, with c.RMB110m and RMB140m from TAVR and neurointerventional, respectively. TAVR implantation volume was 1,200+, accounting for c.14% market share. Currently, Peijia covered c.300 hospitals (vs. 95 hospitals by YE2021). Meanwhile, Peijia had around 160 salesperson (vs. 86 salesperson by YE2021).
　　Eyes on clinical progress of new products: in late 2022, Peijia has enrolled the first patient in the multi-center registration clinical trial of GeminiOne transcatheter edge-to-edge repair (TEER) system and HighLife Transcatheter Mitral Valve Replacement (TMVR) in Fuwai Yunnan Cardiovascular Hospital West China Hospital and Sichuan University, respectively. It’s noteworthy that HighLife TMVR is the first trans-septal TMVR device to enter the pivotal study stage in China. Besides, Peijia has successfully completed the first patient implant in the first-in-man (FIM) clinical trial of the MonarQ Transcatheter Tricuspid Valve Replacement (TTVR) system in the world. For 3rd generation TAVR, TaurusNXT has completed 44 implants with an average 235-day follow-up in China. Peijia expects to submit the application for registration in 2024 in China. We expects Peijia’s TaurusNXT to be the first 3rd TAVR product to be launched in China.
　　Key Risks for Rating
　　1) Intensified competition from domestic players; 2) slower-than-expected ramp-up of TAVR products and R&D progress on pipeline products; 3) bottleneck in number of hospitals capable of performing TAVR operations and training medical professional; and 4) GPO risk on neuro-interventional product.
　　Valuation
　　We lift our 2023-24E topline/bottom line forecasts by adjusting Peijia’s market shares. We expect total c.12,000 commercial TAVR procedures to be performed in 2023 in the industry, and Peijia to have 20% market shares. We rolled over our valuation base year by half year, and updated our risk premium from 7% to 6.7% while adopting a DCF model to value Peijia (WACC: 10.8%, terminal growth 3.0%, vs. pervious: WACC: 11.0%, terminal growth 3.0%). Upgrade to BUY and revised 12-month DCF-bases target price to HK$13.5.