Net profit is under pressure in the short term, and we are still optimistic about the company's long-term growth potential
Yirui Technology released its 1Q24 financial report: achieved revenue of 490 million yuan (yoy: +11%; growth rate decline was mainly due to 1Q23's high base and unrecovered overall demand in the medical device industry), gross profit margin of 53.3% (yoy: -3.7pp, qoq: -2.0pp, mainly an increase in shipments of low-margin core component products), net profit of 140 million yuan (yoy: +2%), net profit of 160 million yuan (yoy: +6%). Although the company's short-term performance and profit are under pressure, we are still optimistic that the company will continue to expand new customers at home and abroad, actively develop new products, and achieve multi-wheel drive growth. We expect the company's 2024E/2025E/2026E net profit to be 8.4/10.1/1.19 billion yuan, respectively; maintain the target price of 246.8 yuan, based on 30.0x 24EPE (vs comparable company Wind's consistent expectation of 21.2x 24E PE, mainly considering the company's leading position in X-ray detectors). Maintain a “buy” rating.
1Q24 review: Short-term net profit was disrupted by the slowdown in detector business revenue growth. The company's 1Q24 achieved operating revenue of 480 million yuan (yoy: +11%). The increase was mainly due to rapid sales growth in sales of core components such as high voltage generators and radiation sources, while the growth rate of the traditional detection business slowed down due to unrepaired downstream demand. As the share of revenue from low-margin core component products increased, the company's 1Q24 gross margin fell to 53.3% (yoy: -3.7pp, qoq: -2.0pp). At the same time, due to the decline in earnings due to short-term fair value changes (1Q24: loss of $31 million), the company only achieved net profit of 140 million yuan (yoy: +2%) in 1Q24.
2024 outlook: Dental & industrial detectors and core components may jointly drive the 24-year net profit growth outlook. Domestic customers may resume procurement as expectations of strong domestic medical regulations weaken; and considering the introduction of overseas dental customers and the release of new industrial products, we believe that the company's dental and industrial business may still be the core source of growth. At the same time, as the company expands its layout in other core component businesses, other parts businesses such as high voltage generators and radiation sources are also expected to perform well in 24 years. As a result, we expect the company to maintain high-quality growth in 24 years, achieving net profit of 840 million yuan (38% increase over the same period).
Maintain target price of 246.8 yuan and “buy” rating
Referring to the comparable company Wind, which unanimously anticipated 21.2x 24-year PE, the company was given 30.0x 24-year PE (considering the company's leading position in X-ray detectors), a target price of 246.8 yuan was obtained; the “buy” rating was maintained.
Risk warning: Overseas market policies and epidemic risk; competition in some intelligent markets is fierce.