Core views:

24Q1 results are in line with recovery expectations, and sales and management expense ratios have been optimized. The company released its 2024 quarterly report. 24Q1 achieved revenue of 380 million yuan, an increase of 7.8% year on year; net profit to mother was 12.36 million yuan, an increase of 19.0% year on year. 24Q1 gross margin was 51.6%, down 0.28pct from 23Q1. The sales expense ratio was 8.7%, down 0.57pct from 23Q1; the management expense ratio was 16.4%, down 2.85pct from 23Q1. In addition, the company increased R&D investment to maintain its competitive advantage. The R&D cost rate was 18.2%, up 0.77pct from 23Q1.

Hi-HIS will enter the full promotion phase. In 2023, Hi-HIS (excluding partial module procurement) has been applied to more than 40 hospital customers across the country, with tertiary hospitals accounting for more than half of the total number of contracted hospitals. In 2023, 22 Hi-HIS-related orders were signed, and the order amount increased significantly over the same period last year. It is expected that 2024 will enter a new phase of batch delivery. (Source: Annual Report '23)

Cooperation with Philips continues to advance, releasing the Feiyuekang CareSync integrated smart hospital information system. On April 18, 2024, the company held an online press conference on the Feiyuekang Integrated Smart Hospital Information System. The solution achieved full coverage of data production, collection, storage, processing, analysis and insight, and promoted the digital and intelligent transformation of hospitals. (Source: The company's WeChat account). The company will further collaborate with Philips on the channel and product side, use incremental customers and channels provided by Philips to promote collaborative sales of the company's medical information products and Philips medical equipment, and create incremental value for the company's products and channels. (Source: Annual Report 23)

Profit forecasting and investment advice. The company's revenue for 2024-2026 is estimated to be 1.89 billion yuan, 22.0 billion yuan, and 25.01 billion yuan, respectively, and net interest rates to mother will be 2.3, 370 million yuan, and 4.7 billion yuan, respectively, and the corresponding EPS will be 0.15, 0.24, and 0.31 yuan/share, respectively. Referring to the latest valuation of comparable companies in 2024, considering that the company is expected to achieve rapid performance growth in 2024, the company can be given a reasonable valuation ratio of 33 times PE in 2024, with a reasonable value of 4.89 yuan/share to maintain a “buy” rating.

Risk warning. Industry demand recovery falls short of anticipated risks; implementation of relevant policies falls short of expectations; application of new technologies such as AI falls short of expectations