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In the past two years, benefiting from the long-term logic of population aging and domestic substitution, medical devices have been recognized as sunrise tracks. As a sub-industry of medical devices, rehabilitation medical devices are regarded as "the sunrise in the morning sun" because of their low penetration rate and good prospects.
In the A-share market, the valuation level is highly correlated with the prosperity of the industry, and the industry in the period of rapid growth can always be particularly favored by the market. In this sense, as the "sunrise in the sunrise", the rehabilitation medical equipment segmentation track deserves our attention.
Rehabilitation:
The sunrise track in the context of an aging population
Rehabilitation medicine makes up for the limitations of clinical medicine, and is listed as one of the four major categories of modern medicine alongside preventive medicine, clinical medicine and health care medicine, and plays an important role in the comprehensive medical system. Since 2012, the mainland has begun to explore the establishment of a three-level rehabilitation medical system:
The first is the acute period, mainly in the tertiary general hospital, mainly in the acute stage of the disease; the second is the stabilization period, mainly in the rehabilitation hospital or the rehabilitation-based secondary general hospital, mainly in the stable period of the disease; the third is the recovery period, mainly in the community, grass-roots medical institutions, mainly in the disease recovery period patients.
In this context, mainland medical institutions are also paying more and more attention to the construction of rehabilitation departments. According to the data of the China Business Research Institute, from 2012 to 2020, the number of rehabilitation beds in the mainland increased from 99,000 to 306,800, an average annual increase of 15.2%; according to the data of the Prospective Research Institute, from 2011 to 2018, the scale of the rehabilitation medical industry in the mainland increased from 13.4 billion yuan to 45 billion yuan, an average annual growth of 19%. As a strong related field, the rapid growth of rehabilitation medical treatment has driven the rehabilitation equipment industry to maintain an average annual expansion rate of about 20%.
The so-called rehabilitation devices are a collective term for appliances, equipment, instruments, technologies and software that can improve the functional condition of people with disabilities. According to the field of application, it can be subdivided into rehabilitation medical equipment, rehabilitation education equipment and rehabilitation aids, etc., among which rehabilitation medical equipment is divided into rehabilitation assessment equipment (to assess the type, nature, location, scope, severity and prognosis of dysfunction), rehabilitation training equipment and rehabilitation physiotherapy equipment (generally refers to the treatment equipment that acts on the human body through physical factors such as light, electricity, sound, magnetism, heat, and cold), which constitutes the main body of rehabilitation equipment. From the perspective of Xiangyu Medical, a representative listed company, rehabilitation physiotherapy equipment and rehabilitation training equipment contribute nearly 90% of revenue.
In recent years, with the development of medicine and the improvement of patients' awareness of rehabilitation, the applicable scenarios and fields of rehabilitation equipment have been continuously expanded, driving the development of the industry into the fast lane.
From the perspective of treatment field, rehabilitation technology has been expanded from the traditional "three paralysis and one interception" (pediatric cerebral palsy, stroke hemiplegia, spinal paraplegia and amputation) to pain rehabilitation, neurological rehabilitation, orthopedic rehabilitation, traditional Chinese medicine rehabilitation, postpartum rehabilitation, accelerated rehabilitation surgery, cardiopulmonary rehabilitation, elderly rehabilitation, chronic disease rehabilitation, rehabilitation of the disabled, rehabilitation of serious diseases, rehabilitation of children, rehabilitation of burns, stroke rehabilitation, spinal cord injury rehabilitation, sports injury rehabilitation and other fields, driving the continuous expansion of applicable scenarios.
From the perspective of applicable scenarios, rehabilitation equipment is gradually moving from medical institutions at all levels such as general hospitals, rehabilitation hospitals, and grass-roots diagnosis and treatment institutions to nursing institutions, rehabilitation centers for the disabled, and social welfare homes, and with the help of chronic disease pain treatment, nursing, walking assistance, sleep assistance, hearing assistance, vision assistance, bath assistance and other treatment areas, it is gradually infiltrating into the home rehabilitation scene. Ruxiangyu Medical has opened a flagship store on the e-commerce platform to sell products to C-end consumers.
Frost & Sullivan data show that from 2014 to 2018, the scale of the rehabilitation medical device market in mainland China increased from 11.5 billion yuan to 28 billion yuan, an average annual growth rate of 24.9%, about 5 percentage points higher than the growth rate of the rehabilitation medical market in the same period. The procurement demand for rehabilitation equipment exceeds the growth rate of the rehabilitation market itself, which proves that the rehabilitation medical market is still in the gap filling stage, and rehabilitation equipment is still in a high boom cycle.
Industry Logic 1:
The gap on the supply side is significant and the potential is huge
Although the rehabilitation medical industry has developed rapidly, on the whole, the current situation of the mainland medical system of "heavy first aid, heavy treatment, light prevention, light rehabilitation" has not been fundamentally improved, which is manifested in the fact that rehabilitation medical resources are still mainly concentrated in tertiary general hospitals, focusing on serving patients in the acute stage of the disease, and there are insufficient personnel in secondary general hospitals, rehabilitation hospitals and grass-roots medical institutions, unclear referral mechanisms, and small medical insurance coverage, and there is still a large room for improvement in the construction of rehabilitation medical systems.
The "Guidelines for the Construction and Management of rehabilitation medicine departments in general hospitals" issued in 2011 clearly pointed out that general hospitals of level two or above (including level two) should independently set up departments to carry out rehabilitation medical services in accordance with the "Basic Standards for Rehabilitation Medicine Departments of General Hospitals", and the name of the departments is unified as the Department of Rehabilitation Medicine. According to the data of the Health Commission, as of 2019, a total of 19,693 general hospitals have been set up nationwide, of which less than 30% have rehabilitation medicine departments. If we refer to the requirements of traditional Chinese medicine hospitals in the Implementation Plan for the Improvement of The Capacity Improvement Project of Traditional Chinese Medicine Rehabilitation Services (2021-2025), the proportion of rehabilitation departments set up in tertiary hospitals and secondary hospitals is 85% and 70% respectively, and the gap in the rehabilitation department of general hospitals is still large.
The Notice on Printing and Distributing Opinions on Accelerating the Development of Rehabilitation Medical Work (Guo Wei Yi Fa [2021] No. 19) issued in 2021 once again clearly requires that, in principle, each provincial capital city and prefecture-level city with a permanent population of more than 3 million should set up at least 1 second-level or above rehabilitation hospital; at least 1 county-level public hospital with a permanent population of more than 300,000 should set up a rehabilitation medicine department; and at least 1 county-level public hospital with a permanent population of less than 300,000 should set up rehabilitation medicine outpatient clinics.
Why is there so much emphasis on the construction of a rehabilitation medical system at the policy level? Because it is similar to physical examination, timely rehabilitation intervention can greatly reduce medical expenditure in the middle and late stages, which is especially necessary in mainland China, which faces a large medical insurance gap.
WHO reports that effective rehabilitation interventions can control or delay the onset of at least 50% of disabilities. According to the "National Rehabilitation Medicine Professional Treatment Service Quality and Safety Report", the early rehabilitation intervention rate of orthopedics and neurology in mainland China is about 10%, and the early rehabilitation intervention rate of intensive care wards is only about 15%, which has a large room for improvement. For example, thanks to the implementation of the concept of "rehabilitation pre-position", the disability rate of "stroke" in the United States is only 30%, compared with more than 75% in the mainland.
As far as the rehabilitation medical system is concerned to fill the gap, in addition to the strong promotion of policies, the motivation of medical institutions is also improving. At this stage, the mainland's medical reform implements "two drops and one liter", two drops refers to the reduction of drug fees and examination fees, and one liter refers to the increase in the price of diagnosis and treatment, surgery, rehabilitation, nursing, traditional Chinese medicine, beds and other items. With the shrinking profit margin of drugs and the rise in the price of medical services such as rehabilitation, the internal motivation of hospital construction rehabilitation departments has increased.
In addition, there is also a large space for the construction of professional rehabilitation hospitals. According to data from the Health Commission, at the end of 2020, there were 739 rehabilitation hospitals in the mainland, including 156 public hospitals and 573 private hospitals, accounting for 77.5%. Among the various types of hospitals, the overall gross profit margin of rehabilitation hospitals is higher, which is more attractive to private capital, faces a huge supply and demand gap, and the construction speed of private rehabilitation hospitals in the future is likely to accelerate.
Industry Logic 2:
Potential demand continues to activate, and the demand side space is huge
From the demand side, on the one hand, the relatively mature stock demand scenarios are far from being met, and there is still a lot of room for demand release; on the other hand, with the improvement of residents' health awareness, many potential rehabilitation demand scenarios are being opened.
Generally speaking, the disabled, chronic disease patients, disabled elderly, etc. are the main audiences of the rehabilitation medical market, and at this stage, they generally do not receive sufficient rehabilitation services. For example, according to the Data Of The China Disabled Persons' Federation, a total of 10.777 million licensed disabled persons and disabled children received basic rehabilitation services in 2020, accounting for only 12.67% of the total number of disabled people in the country; among the more than 200 million patients with chronic diseases in mainland China, more than 10 million people with chronic diseases have rehabilitation needs, but they are limited by medical resources, of which about 80% have not received adequate and effective treatment.
According to the statistics of the Lancet study, the total number of people in mainland rehabilitation needs reached 460 million in 2019. In terms of diseases, the number of patients with musculoskeletal diseases is the largest, reaching 320 million in 2019, followed by sensory disorders and neurological diseases, with a patient population of 140 million and 0.6 billion people, respectively.
At the same time, the improvement of patients' awareness of rehabilitation is also becoming an important driving force for the rapid development of the industry.
Generally speaking, rehabilitation medicine is mainly suitable for bone injury rehabilitation, neurological rehabilitation, rehabilitation in the late stage of stroke, pain rehabilitation, etc., but with the improvement of everyone's health awareness, almost all specialized diseases have space for applying physical therapy and rehabilitation methods in the later stages. Taking postoperative rehabilitation as an example, almost all postoperative and especially after major surgery may face the problem of slower blood flow, and there is a risk of death from deep vein thrombosis. As the patient's awareness of rehabilitation increases, it will naturally open up space for rehabilitation treatment to prevent deep vein thrombosis.
For example, with the improvement of maternal health awareness, the demand for postpartum rehabilitation has gradually been released with medical insurance coverage and consumption upgrades, and more and more local hospitals, private hospitals, confinement centers and postpartum rehabilitation centers have carried out pelvic floor and postpartum rehabilitation services, and the pelvic floor repair market has been opened. Similarly, with the rise of rehabilitation medicine for sub-healthy people, the potential customer base of rehabilitation medicine is expected to expand significantly, greatly expanding the industry space.
In fact, many rehabilitation medical device manufacturers will spend a lot of effort on consumer health awareness education and training, so as to activate the potential demand market, in this sense, supply drives demand, and demand in turn will strengthen supply, thereby driving the rapid development of the rehabilitation medical industry.
According to KPMG, KPMG predicts that during the period 2020-2025, the market size of the rehabilitation medical industry in mainland China will grow at a compound annual growth rate of 20.9%, and by 2025, the market size will exceed 200 billion yuan. Driven by this, rehabilitation medical devices can still maintain a high growth rate with a high probability, and the medium- and long-term prospects can be expected.
Market pattern and outlook
In the period of rapid development of the industry, in theory, all participants can share a piece of the pie, from the logic of investment, this stage is generally not too picky enterprises, all enterprises in the industry have opportunities. Of course, from the perspective of robustness, leading enterprises are more worthy of attention.
At this stage, the number of enterprises in the rehabilitation medical device industry in the mainland is relatively large, and the industry is relatively scattered. From the perspective of market participants, foreign representative enterprises include DJO Global, Inc., BTL Corporate, OG Wellness Technologies Co., Ltd. And the representative enterprises in China mainly include Xiangyu Technology, Weisi Medical, Pumen Technology, Longzhijie, Qian Jing Rehabilitation, etc. As far as the three A-share listed companies are concerned, Pumen Technology focuses on wound repair, Weisi Medical focuses on postpartum and pelvic floor repair, and Xiangyu Technology is a multi-product line layout, which is one of the few enterprises in China with a full range of rehabilitation medical equipment research and development and production capabilities.
Since 2021, affected by factors such as high base and raw material price increases, the performance of the listed rehabilitation equipment industry has deteriorated marginally, which is manifested in narrowing gross profit margins and slowing growth, which has been affected by this, and the sector has undergone more obvious adjustments. However, considering the medium- and long-term high prosperity of the industry, short-term performance fluctuations are not worth worrying about. For investors, short-term adjustments bring precisely layout opportunities.
[Note: The market is risky, investment needs to be cautious. In any event, the information contained in this subscription account or the opinions expressed are for the purpose of exchanging views and do not constitute investment advice to any person. 】
This article was originally produced by "Suning Financial Research Institute", and the author is Xue Hongyan, vice president of Suning Financial Research Institute.