Introduction to this report:

2024Q1 revenue is growing rapidly, and equity incentive costs affect short-term profits. As high-end models continue to expand in the future, the net interest rate is expected to gradually increase, maintaining the shareholding rating.

Key points of investment:

Maintain an increase in holdings rating. Maintain the 2024-2026 EPS forecast of 0.78/1.30/2.17 yuan, maintain the target price of 69.47 yuan, corresponding to the 2024 PS9.3X, and maintain the holdings increase rating.

Revenue is growing rapidly, and equity incentive costs affect short-term profits. 2024Q1 achieved revenue of 169 million yuan (+34.9%), net profit attributable to mother of 2.76 million yuan (-83.32%), and net profit of non-return to mother of 250,000 yuan (-102%). Revenue achieved rapid growth under external pressure, and the slow profit growth rate was mainly due to high equity incentive costs. After exclusion, net profit of 2024Q1 was 24.5567 million yuan (+24%). It is expected to show a positive trend throughout the year as the domestic bidding side gradually improves and large-scale equipment updates are gradually implemented.

Gross profit margins have been rising steadily, and high-end models continue to expand. The 2024Q1's gross profit margin is 76.40% (+0.23pct), which is rising steadily. It is expected that the share of AQ200+AQ300 high-end models will continue to increase. The 2024Q1 sales/management/R&D expense ratios are +4.46/+2.18/+0.9pct, respectively, mainly due to the increase in equity incentives and amortization expenses and the necessary sales and R&D investment in the early stages of new product promotion. It is expected that with the subsequent AQ300, the higher gross margin level of soft mirror products will gradually increase.

The growth rate of overseas markets is expected to increase. In 2023, the company's overseas sales revenue was 113 million yuan (+11.7%), accounting for 17%. Most of this was sales in Europe, and mainly mid-range and low-end models. In 2024, as the company further establishes overseas offices and increases sales promotion efforts, developing countries are expected to experience good growth throughout the year. At the same time, through early registration applications, academic promotion, and exhibition promotion, the revenue volume of high-end models is also expected to increase in the future. Since 2023, various lenses have been launched, including duodenoscopes, ultrafine endoscopes, bifocal endoscopes, split upper gastrointestinal endoscopes, etc., which are expected to enhance competitive advantage and clinical academic recognition on the bidding side.

Risk warning: product commercialization falls short of expectations, R&D falls short of expectations, etc.