Incidents:

The company released the 2023 annual report and the report for the first quarter of 2024. For the full year of 2023, it achieved operating income of 34.932 billion yuan (YoY +15.04%), net profit of 11.434 billion yuan (YoY +20.04%); 2023Q4 achieved operating income of 7.628 billion yuan (YoY +7.90%) in a single quarter, net profit of 1,748 billion yuan (YoY +16.15%), net profit of 1,748 billion yuan (YoY +16.15%), net profit of 1,748 billion yuan (YoY +16.15%) (YoY +14.88%); 2024Q1 achieved revenue of 9.373 billion yuan (YoY +12.06%) and net profit to mother of 3.160 billion yuan (YoY +22.90%) in a single quarter, after deducting non-net profit of 3,037 billion yuan (YoY +20.08%).

Comment:

1. The company's performance in all sectors is in line with expectations, and the growth rate of in vitro diagnosis and minimally invasive surgery is impressive. In 2023, all segments of the company achieved steady growth: 1) In vitro diagnosis revenue of 12.42 billion yuan (+21.1%). With the gradual release of recovery reagent products for routine diagnosis and treatment, supporting instruments and assembly line installations also achieved impressive performance. For example, the BC-7500 installed more than 2,000 units, and more than 2,000 chemiluminators were added, of which high-speed machines accounted for nearly 60%; the overseas market grew more than 30% for two consecutive years with the acceleration of breakthroughs from CUHK customers; 2) Life Information and Support revenue of 15.25 billion yuan (+13.8) %). New medical infrastructure in the domestic market led to the release of procurement demand in half a year + the delay in the pace of industry rectification and bidding in the second half of the year caused a certain disturbance in product release. The company seized opportunities and flexibly adjusted its market strategy to achieve more than 30% growth in minimally invasive surgery, and the market share of hard mirror systems rose to third in the country; in overseas markets, production capacity recovery from 23Q2 and high-end customer breakthroughs drove international business growth of more than 20% in the second half of the year; 3) Medical imaging revenue of 7.03 billion yuan (+8.8%). The company continued to promote high-end equipment at home and abroad, for the first time, leapfrog domestic and third high-end ultrasound Model ultrasound has grown by more than 20% in both domestic and foreign markets.

2. The domestic market gradually recovered, and the international market accelerated high-end breakthroughs. Domestic business achieved single-digit growth in 24Q1 due to emergency needs such as the construction of the 23Q1 ICU and industry rectification. Among them, in vitro diagnosis and medical imaging all achieved restorative growth, and it is expected to resume steady growth as public hospital bidding activities resume quarterly. International business, high-end products and overall solutions in various sectors helped new high-end customers break through and expand the horizontal business of existing high-end customers. Overseas growth in 24Q1 was nearly 30%, with developing countries growing by more than 30%.

3. Endogenous+outreach, the company continues to enrich its product matrix, promote high-end breakthroughs, and consolidate comprehensive competitiveness. The company insists on high R&D investment, with R&D expenditure accounting for more than 10% of revenue, accelerating the iterative upgrading and integration of products in various sectors. Furthermore, after mergers and acquisitions of Hyptide and DiaSys to improve the layout of the in vitro diagnosis industry chain, the company acquired Huitai Medical to enter the high-potential cardiovascular field in 2024, collaborating with existing businesses and the advantages of platform-based enterprises to further consolidate its comprehensive competitiveness.

Profit forecast: We expect the company's 2024-2026 revenue to be 421.58, 504.45, and 60.101 billion yuan, respectively, with year-on-year growth rates of 20.69%, 19.66%, and 19.14% respectively, and net profit to mother of 139.64, 169.74 billion yuan, and 20.610 billion yuan respectively. The year-on-year growth rates are 20.57%, 21.5%, and 21.43%, corresponding to the current stock price PE, respectively, maintaining the “Highly Recommended” rating.

Risk warning: Market expansion falls short of expectations, mergers and acquisitions fall short of expectations, product development falls short of expectations, changes in industry policies, intensification of market competition, changes in the international environment, risk of impairment of goodwill, etc.