1Q24 revenue is in line with our expectations
The company announced 1Q24 results: revenue of 170 million yuan, up 34.9% year on year; net profit to mother of 2.76 million yuan, down 83.3% year on year. Net profit attributable to mother after excluding share payments was 24.57 million yuan, an increase of 24.2% over the same period (after excluding share payments). 1Q24 revenue and net profit after share payments were in line with our expectations. The company maintains the same performance targets for installed capacity and equity incentives for level-III hospitals throughout the year.
Development trends
1Q24 revenue continued to grow well under a high base over the same period, focusing on quarterly revenue elasticity. AQ-300 was launched in November 2023, and the company concentrated on recruiting tertiary hospital dealers and selling multi-channel prototypes in 4Q22-1Q23. 1Q23's revenue increased 54% year over year to 130 million yuan, of which we estimate that the AQ-300 accounts for about half of the revenue. The construction of the AQ-300 channel was basically completed in 1Q23, and we expect that the prototype's high base will gradually return to normal from the 2nd quarter. AQ-300 was in clinical trial and optimization in 1H23. Admission to 3Q23 was affected by industry policies, and it was officially promoted in 4Q23.
We remain confident in the product power of the AQ-300. As clinical acceptance increases and brand power spreads, we believe the AQ-300 is expected to show an accelerated deployment trend in 2024. Considering seasonal factors in the company's equipment revenue, we believe there are opportunities for a year-on-year and month-on-month rebound in 2Q24 revenue.
1Q24 The profit side was hampered by equity incentive costs. In October 2023, the company launched a new round of 5 million shares of equity incentive plan (2024-2026). When the new round of plans was introduced, the company's equity incentive plan of 2.5 million shares in 2022 (2024) was still in effect. As a result, the 2024 equity incentive fee is too high due to the combination of the two installments. We estimate the cost of equity incentives for 1Q24 is about 21.8 million yuan (about 3.23 million yuan for 1Q23). The company expects equity incentive expenses to be around 90 million yuan for the full year of 2024, which will gradually decrease after 2025. On the cost side, we believe that the personnel support required to promote level-III hospitals is far higher than that of level-II hospitals. 1Q24's sales expenses increased 53.1% year-on-year to 63.58 million yuan, which is within a reasonable range. At the same time, considering the quarterly nature of the company's revenue and the steady growth trend of expenses, the net interest rate fluctuates to a certain extent between quarters. We believe that the annual net interest rate is expected to gradually improve.
Overseas revenue growth is expected to accelerate. In 2023, the company's overseas revenue was 110 million yuan, an increase of only 13% over the previous year. The AQ-300 was approved by CE in 1Q24. The company has a localized sales team of about 30 people in Germany, hoping that the volume of mid-range and high-end models will optimize the European product structure and drive revenue. The company has a 30-person team in Shenzhen responsible for promotion in emerging markets. The emerging market base is low, there are many gaps, and there is a certain level of revenue elasticity. We are optimistic about the company's overseas revenue acceleration opportunities this year.
Profit forecasting and valuation
Keep profit forecasts unchanged. The current stock price corresponds to 39.2 times the 2025 adjusted price-earnings ratio. The outperforming industry rating and target price remain unchanged at 70.52 yuan, corresponding to 51.7 times the adjusted price-earnings ratio in 2025. There is 32% room for growth compared to the current stock price.
risks
R&D progress fell short of expectations, the competitive landscape deteriorated, and policies affected prices.