The collective procurement has influenced Beijing Chunlizhengda Medical Instruments (01858) with the stock price rising by over 120% within the year. After trading sideways for three months, where will it go next?

In May of last year, the artificial joint national procurement project was opened in Tianjin, with Beijing Chunlizhengda Medical Instruments (01858) winning the bid for three product systems of hip joints and the total knee joint system. Following this, the company adjusted prices of channel inventory before the implementation of centralized procurement, resulting in short-term pressure on performance due to the impact of centralized procurement. In the third quarter of 2024, the company's revenue fell by 49.03% year-on-year and it incurred a net loss. However, as the adjustment of channel inventory approached its end, a year later, Beijing Chunlizhengda Medical Instruments' performance began to stabilize and rise significantly. Recently, Beijing Chunlizhengda Medical Instruments released its financial report for the first three quarters of 2025. The report showed that the company achieved operating income of 756 million yuan in the current period, an increase of 48.75% year-on-year; net profit attributable to shareholders of the listed company was 192 million yuan, a significant increase of 213.21% year-on-year. In the third quarter alone, the company achieved operating income of 268 million yuan, an increase of 109.51% year-on-year; net profit attributable to shareholders was 77.0619 million yuan, turning from a loss to a profit year-on-year. As the impact of centralized procurement gradually diminishes, Beijing Chunlizhengda Medical Instruments, with its improved profitability, has regained recognition in the secondary market. Since the beginning of this year, the company's stock price has entered a steady upward trend, with a year-to-date increase of 122.13% as of October 31. Signs of an increase in stock prices before the release of financial performance? After sweeping through the orthopedic consumables industry for 3 years, a group of domestic orthopedic industry leaders finally turned in a rebound performance in the first quarter of this year. Among them, Beijing Chunlizhengda Medical Instruments achieved its first profit growth after a decline, with current revenue of 230 million yuan (+3.6%) and net profit attributable to shareholders of 58 million yuan (+5.2%). Behind the slight increase in revenue and profits, Beijing Chunlizhengda Medical Instruments has shown a sustained improvement in the quality of its profits. It is understood that after entering centralized procurement in 2021, although the sales volume of joint products increased by 63%, the company did not achieve profit growth for three consecutive years. The net profit even dropped significantly by 66% for the whole of last year. However, in the first quarter of this year, the company's gross profit margin rebounded to 66.7%, and net profit margin rose to 25.2%. This led the market to believe that the negative impact of centralized procurement on the company was quickly dissipating. From the monthly performance of the company's stock price and changes in trading volume, the change in the attitude of the insiders can be clearly seen. The stock chip distribution chart of Beijing Chunlizhengda Medical Instruments in mid-March showed that the chip peak was concentrated near the cost price of 8.40 Hong Kong dollars, with a low percentage of stranded chips above, indicating that many insiders at that time had entered the market after the market retreated in mid-October last year. Although Beijing Chunlizhengda Medical Instruments' stock price fell by 13% in October last year, it began a slow and steady recovery over the next 5 months. From November 2024 to March of this year, the stock price recorded a monthly cumulative increase of 17.73% in the "five consecutive months" trend, but the trading volume for each month decreased significantly. During this period, the trading volume in February this year only exceeded 10 million shares, and the smallest trading volume dropped to 4.9385 million shares, reflecting the consistent optimism of insiders towards the future growth of Beijing Chunlizhengda Medical Instruments. However, the market seems to have underestimated the speed of recovery in the domestic orthopedic consumables industry. In the first half of 2025, the net profit growth rates of Double Medical Technology Inc., Beijing Chunlizhengda Medical Instruments, and Shandong Weigao Orthopaedic Device reached 76.69%, 44.85%, and 52.43% respectively; Shanghai Sanyou Medical Co., Ltd's current net profit even increased by 2083.64% year-on-year, achieving more than a 20-fold increase; even for the steadily growing AK MEDICAL, its net profit growth rate was 15.3% year-on-year. This also confirms the market's previous judgment on the domestic orthopedic consumables industry. As major central procurements take more than 1-2 year cycles to execute, channel inventory is gradually consumed, economies of scale are demonstrated, and companies will start to enjoy the dividend of trading volume for price. Looking specifically at the orthopedic consumables business, Beijing Chunlizhengda Medical Instruments' revenue growth rate in the second quarter of 2025 was higher than its peers, reaching 62.85%. Considering the current market situation, benefiting from this year's Hong Kong stock bull market for innovative medical devices, Beijing Chunlizhengda Medical Instruments' stock price rose significantly in May, June, and July, with increases of 17.69%, 12.18%, and 29.85% respectively. During this process, the overall trading volume fluctuated greatly, reaching 34.5134 million shares, 28.5463 million shares, and 50.7748 million shares respectively. However, Beijing Chunlizhengda Medical Instruments entered into a 3-month period of sideways fluctuations afterward. From July 24th to October 30th, the stock price increase in this period was only 0.2%, with a range of fluctuation reaching 23.50%. While maintaining a stable sideways effect, the stock price fluctuated significantly within the range. During this time, buyer funds pressed down on part of the chips to make deals, while also accepting selling pressure chips, locking most of the chips in the absorption zone. At this time, the average cost of chips at Beijing Chunlizhengda Medical Instruments rose to 15.88 Hong Kong dollars. Compared to early August this year, the proportion of bottom low-cost chips has significantly decreased. During this period of sideways fluctuations, the main funds at Beijing Chunlizhengda Medical Instruments showed significant changes. In the first week of September this year, the main funds reversed their previous net outflow and slight inflow actions, with a net inflow of 32.3101 million Hong Kong dollars. In the next 5 weeks, the net outflow of funds gradually decreased, and the net inflow continued to increase. In September and October, the main funds maintained a net inflow of funds, and finally, after the release of the company's Q3 financial report, the main funds in the market chose to rapidly raise Beijing Chunlizhengda Medical Instruments' stock price. Beijing Chunlizhengda Medical Instruments closed up 14.04% on October 31st, with a daily trading volume of 20.5379 million shares and a turnover rate of 21.59%, indicating that the main funds had started to profitably exit during the uptrend. Direction for going global confirmed, long-term investment value remains From a technical perspective, the sharp rise on October 31st has quickly lifted Beijing Chunlizhengda Medical Instruments' stock price to the upper BOLL line, with the corresponding RSI indicator diverging rapidly upwards after the golden cross. Short-term overbought signals have already been established, which may bring about a technical rebound for Beijing Chunlizhengda Medical Instruments' stock price. However, in the current context of industry recovery and a clearly defined direction for going global, even if there is a short-term pullback, it will not affect the long-term value of Beijing Chunlizhengda Medical Instruments. This is a reassurance for long-term investors. From a market perspective, according to statistics from "Fortune," the global orthopedic medical device market reached $622.2 billion by 2024 and is expected to surpass $940 billion by 2032, with an annual growth rate of 5.3%. In the current situation where the domestic traditional orthopedic market is covered by central procurement and enters into a competition within the stock market, entering the overseas market to gain a second growth curve has almost become a necessary choice for industry-leading companies. As one of the early domestic orthopedic consumables companies to enter overseas markets, Beijing Chunlizhengda Medical Instruments started synchronously deploying its own brand and OEM brand overseas strategies. One of the key factors supporting this strategy is Beijing Chunlizhengda Medical Instruments' continuous and paced product research and registration. In recent years, the company's femoral head reconstruction blocks, tantalum metal fillings, and hip joint prosthesis components have been successively approved for listing by the National Medical Products Administration, marking the company's breakthrough in breaking foreign monopolies and becoming the first and only domestic enterprise to own a chemical vapor deposition manufacturing porous tantalum metal implant. The company has also obtained multiple registration certificates for products such as 3D printed titanium alloy ligament anchor nails, tantalum-coated ligament anchor nails, and ligament anchor nails (insert type), further enriching its sports medicine product line. The company has also obtained registration certificates for knee joint replacement surgery navigation systems and hip joint replacement surgery navigation systems, making it the first domestically developed orthopedic handheld Siasun Robot&Automation system. In the first 9 months of this year, the company's R&D investment accounted for 11.44% of its current income, and business-wise, it has obtained 35 new registration certificates. As the company actively expands its international business, the rapidly growing overseas revenue has become an important source of income for Beijing Chunlizhengda Medical Instruments. In the first half of this year, the proportion of overseas income for the company has reached 40%. At present, Beijing Chunlizhengda Medical Instruments' exported products mainly include hip joints, knee joints, and other products. With its high level of technological expertise and active product registration, the company smoothly passed the CE annual system audit and supervision audit for its hip, knee, and spinal series products as early as 2023. With the FDA 510(K) approval for the knee joint prosthesis system, it indicates that the company's technological advantage has reached an internationally leading level, giving it strong competitiveness in the international market. This will help continuously improve the company's international sales revenue and establish a strong fundamental basis for its future valuation growth.