The 2023 results are in line with expectations. New product launches and new orders are imminent, maintaining that the “Buy” rating company achieved revenue of 471 million yuan (-1.31%), net profit of 146 million yuan (-20.19%), net non-net profit of 136 million yuan (-19.20%), net cash flow from operating activities of 158 million yuan (+51.49%); by business, medical endoscopy revenue of 371 million yuan (+1.42%), accounting for 79% of revenue and revenue of optical products of 97 million yuan (-11.63%) ), accounting for 21% of revenue; the overall cost rate is relatively manageable, with R&D expenses rate of 14.00% (+1.44pct), management expenses rate of 11.32% (+2.43pct), and sales expenses ratio of 3.85% (+0.59pct). Considering the demand for overseas orders and the impact of inventory reduction, the pace of new orders, equity payment fees, and depreciation, we lowered the 2024-2025 and added profit forecast for 2026. The net profit for 2024-2026 is estimated to be 2.00/2.60/339 million yuan (original value of 2.42/308 million yuan), corresponding EPS is 1.64/2.14/2.79 yuan/share, respectively. The P/E corresponding to the current stock price is 27.2/21.0/16.1 times, respectively, due to full coverage of the company's products and service capabilities Market demand for fluorescence endoscopes, as the trend of fluorescence endoscopes replacing white light endoscopes gradually unleashes performance potential. At the same time, the company's complete endoscope system continues to iterate and innovate and diversify, and sales and promotion of complete machines will further increase revenue and profits, and maintain a “buy” rating.

The inflection point of 2024Q1 operations has been reached, and full-year results are expected to continue to improve month-on-month in 2024Q1 to achieve revenue of 118 million yuan (-20.74%), net profit of 0.38 million yuan (-20.68%), after deducting non-net profit of 0.36 million yuan (-21.40%). Revenue and profit have improved compared to 2023Q4, and full-year results are expected to continue to improve month-on-month.

Using cost and R&D advantages, it has entered the entire midstream endoscope machine, and continues to expand its optical business in the US market: the company's next-generation endoscopy system for American customers was officially launched in September 2023. The new 4mm hysteroscope developed for the US market has completed product finalization and mass production preparations have begun. It is expected to be officially launched on the market in June 2024. Supporting 2.9mm cystoscopy, 3mm pediatric laparoscopy, and open surgical exoscopes are also being developed. The company's cooperation with US customers extends from the original laparoscopy to the fields of urination, gynecology, and open surgery; Domestic market: Arthroscopy, 3D laparoscopy, and thoracic endoscopy have completed product registration and have begun to be put on the market; a full range of laparoscopes, including white light, fluorescence, defogging, 3D fluorescence, standard length, extended, and ultra-fine laparoscopes are being registered and certified one after another. It is expected that registration will be completed in 2024. At that time, the company's laparoscopy will fully cover the needs of abdominal surgery; endoscopic products such as hysteroscopy, cystoscopy, and sinus scopes developed for urology, gynecology, and head and neck surgery have already been completed Development and registration tests have begun, and the product is expected to be in 2024 Registration can be completed in the medium term. These small lenses will strongly support the company's brand building and business development in specialties such as gynecology and head and neck surgery; the company's second-generation endoscopic camera system was proven in November 2023, and has now been launched on the market and sales have been formed. The company successfully obtained registration certificates and production licenses for thoracic endoscopes (610), thoracic abdominal endoscopes (E800, E810), arthroscopy (510), 3D abdominal endoscopy (900), 4 endoscopic LED cold light sources (B700, B760, L88 AIM, L88), and 4 4K endoscopic camera systems (TS88 Pro, N760, TS88, N700-F), vertical traction therapy devices.

Risk warning: Product development progress falls short of expectations; marketing falls short of expectations.