Southwest: Stable upward trend in the hemodialysis treatment rate, domestic consumables concentration expected to increase through joint procurement.

Southwest released a research report stating that there is still a large room for improvement in the dialysis treatment rate in China compared to developed countries. The number and quality of PD centers in different regions are also extremely unbalanced, and the development of peritoneal dialysis at county-level hospitals can be promoted through establishing corresponding models. Therefore, it is the right time for domestic substitutes on the equipment side, with a high selection proportion of strong supply-capacity top enterprises under the centralized procurement policy, and the industry concentration is expected to increase. Southwest's main points are as follows: The hemodialysis treatment rate is expected to continue to increase, and the peritoneal dialysis model is of reference significance. Blood purification is the mainstream treatment method for end-stage renal disease (ESRD), with hemodialysis being widely used. There is still a large room for improvement in the dialysis treatment rate in China compared to developed countries, with China's dialysis treatment rate expected to be around 26% by 2023, while the US is at 58%. Due to the vast territory and large population of mainland China, the number and quality of PD centers are extremely unbalanced in different regions. Peritoneal dialysis is relatively cheaper and has little difference in efficacy compared to hemodialysis, so establishing corresponding models can drive the development of peritoneal dialysis at county-level hospitals. It is the right time for domestic substitutes on the equipment side, and the concentration of consumables is expected to increase with centralized procurement. The domestication rate of blood dialysis machines is low, with domestic brands accounting for only 19% in 2021, while major foreign brands dominate the market. However, with policy promotion such as the establishment of independent blood dialysis centers in provincial capitals and central cities with requirements for the number of dialysis machines, it provides new space for domestic dialysis machines. Currently, the top domestic dialysis machines have little difference in efficacy compared to foreign ones, and domestic brands are expected to continue to increase their market share. Consumables such as blood dialyzers are expected to increase their concentration through centralized procurement, such as the landing of the Henan Alliance Blood Dialysis Consumables Centralized Procurement. Domestic manufacturers have clear pricing strategies, with relatively moderate price reductions, and different strategies for different products. Some products are expected to retain profit margins through better bid prices, while others achieve volume through low-price strategies. At the same time, under the centralized procurement policy, the high selection proportion of top enterprises with strong supply capacity is expected to increase industry concentration. Layout of the entire hemodialysis industry chain and providing overall solutions is the way for future development. The global number of ESRD patients continues to grow, with China having 3.85 million patients in 2022, accounting for approximately 37% globally, with an expected CAGR of around 6% from 2024 to 2030. Faced with such a large patient population, the layout of the entire industry chain is particularly important. Related products are also continuously being developed for the fistula issues in late-stage renal dialysis patients, such as PTA high-pressure balloon dilating catheters, and disposable dialysis catheter products. Taking Jiangxi Sanxin Medtec as an example, its disposable dialysis catheter broke the import monopoly and occupies a leading position in the market, demonstrating the strong competitiveness of domestic products. From the perspective of the entire industry chain, there is a focus on the three cycles of "primary disease of kidney disease - early and middle stage of kidney disease - end-stage kidney disease." Relevant targets: Sws Hemodialysis Care (688410.SH), Jiangxi Sanxin Medtec (300453.SZ), Jafron Biomedical (300529.SZ), Guangdong Biolight Meditech (300246.SZ), WEIGAO GROUP (01066), etc. Risk warning: Risks of underperforming performance; risks of deterioration in market competition; risks of declining industry prosperity.