Introduction to this report:

2024Q1 results fell slightly short of expectations. The high base has led to a decline in performance. Considering the good feedback from US customers on new terminals and the gradual development and listing of various lenses in the future, the company's performance is expected to improve quarter by quarter.

Key points of investment:

Maintain an increase in holdings rating. Considering the high cardinality effect, the 2024-2025 EPS forecast was lowered to 1.80/2.34 yuan (originally 1.93/2.44 yuan), and the 2026 EPS forecast was added by 2.94 yuan. Referring to comparable company valuations, the 2024 PE30X was given, the target price was lowered to 54 yuan, and the holdings increase rating was maintained.

The results fell slightly short of expectations. In 2023, revenue of 471 million yuan (-1.31%) was achieved, and net profit to mother was 146 million yuan (-20.19%). 2024Q1's revenue was 118 million yuan (-20.74%), net profit attributable to mother was 38.44 million yuan (-20.68%), and net profit after deducting non-return net profit of 36.46 million yuan (-21.4%). The performance was slightly lower than expected.

The high base led to a decline in performance, which is expected to improve quarterly in 2024. The decline in 2024Q1 revenue is mainly due to US customers preparing for the launch of new products and increasing procurement of lenses and light sources since 2023Q1. As a result, both lenses and light sources form a high base. For 2024Q1, we expect lens shipments to be in line with expectations, and light source shipments are slightly lower than expected. New products from US customers were launched in the US in September 2023, and market feedback is good. Through further promotion in the US and overseas countries, terminal sales are expected to maintain a good trend. At the same time, in addition to laparoscopes, the company is also developing various other lenses for the US market, including hysteroscopes, cystoscopes, pediatric laparoscopes, etc., and the launch of new products is expected to increase the company's shipments. At the end of 2023, the company launched a second-generation camera system, and domestic machine sales are also expected to achieve a breakthrough in 2024. The optical industry achieved revenue of 97 million yuan (-12%) in 2023. Weak downstream demand led to a decline in revenue, which is also expected to have a negative impact on 2024Q1 results.

Net interest rates are expected to rise steadily. The 2024Q1 sales/management/ R&D expense ratios are +1.14/+1.03/+1.15pct, respectively. The net interest rate is expected to rise steadily in 2024 as share payments are reduced and Thai subsidiaries are put into operation.

Risk warning: R&D progress falls short of expectations, commercialization of the whole machine falls short of expectations, etc.