Event: The company announced its results for the third quarter of 2023. The first three quarters of 2023 achieved revenue of 7.317 billion (+10.0%), net profit of 579 million (+37.8%), net profit of 555 million dollars (+27.9%), net profit of 555 million dollars (+27.9%); net income of $2,244 million (+1.3%), net profit of 120 million yuan (+22.9%), net profit of $144 million (+76.0%) in the first three quarters of 2023.

Profit continued to grow at a high rate, and gross margin increased significantly over the same period last year. Revenue maintained a growth trend. The growth rate was higher than revenue, mainly due to 1) the lower base for the same period in Q3 last year; 2) Q3 had a gross profit margin of 28.31%, a year-on-year increase of 2.86pct, and the 2023Q1-3 gross profit margin of 27.7% (+1.7pct). The company continued to promote product structure optimization. The two main industries of medical devices and pharmaceutical equipment grew steadily, continuing the previous trend of increasing gross margin; 3) The net profit withheld from the previous three quarters increased 27.9% year-on-year, showing relatively rapid growth. In the first three quarters, the sales expense ratio was 9.24% (+0.4pct), the management expense ratio was 4.8% (-0.3pct), and the R&D expense ratio was 4.0% (+0.3 pct). Overall, all expense rates remained stable.

Internationalization is progressing steadily, and the amount of new contracts signed in the first half of the year was +98% compared to the same period last year. The company actively promotes an internationalization strategy. Through marketing strategies such as “new products enter old markets, old products enter new markets”, the export business of 23H1's main product lines is progressing smoothly, and the amount of newly signed contracts increased 98% compared to the same period last year. Some products and some markets achieved zero breakthroughs: the Vietnam office set up in 2022 achieved breakthroughs such as the first non-PVC soft bag production line in the Laos market and the first peritoneal dialysis line in the Vietnamese market in the first half of the year; the Egyptian office set up in 2022 signed new orders in Morocco and other markets; experimental animal products achieved an export breakthrough in the Russian market for the first time and signed a FAT contract; the Thai market achieved the first breakthrough in high-end product series such as the StableH8500 electric hydraulic operating table; the first export of a non-PVC membrane infusion production line in the US market Successful delivery; new markets such as Chile, Iran, Vietnam, Argentina, and Bangladesh have been developed for surgical instruments. Overseas markets help to further open up the company's medium- to long-term growth space.

The launch of new mobile X-ray products continues to enrich the diagnostic product line layout. On October 30, the company announced that the mobile digital X-ray photography system product has obtained the “People's Republic of China Medical Device Registration Certificate” issued by the Shandong Drug Administration. This product is mainly used for auxiliary diagnosis of acute myocardial infarction. The product takes only 15 minutes from sampling to obtaining test results. Compared with traditional chemiluminescence, the testing time is greatly shortened. At the same time, the supporting testing instruments are small in size and easy to operate, and can be applied to various usage scenarios. The launch of new products is expected to continue to enrich the company's X-ray diagnostic product line.

Profit forecasting and valuation: superior inventory+expansion+incentive mechanism reform. The triple change opens up a medium- to long-term growth logic.

The company's revenue for 2023-2025 is estimated to be 103/11.8/137 billion yuan, with a year-on-year growth rate of 10.9%/14.9%/16.0%; net profit of 7.1/8.9/1.14 billion, respectively, with a year-on-year growth rate of 40.6%/26.6%/27.2%, and the current market value corresponding to PE 16, 12, and 10 times. Maintain a “buy” rating.

Risk warning: New product launch progress falls short of expectations; new product promotion falls short of expectations; overseas business expansion falls short of expectations; the epidemic has repeatedly affected the release of consumer demand.