Incident: The company released the 2023 annual report and the report for the first quarter of 2024. In 2023, the company achieved operating income of 745 million yuan (+52.46%); net profit to mother of 227 million yuan (+81.03%), after deducting net profit of non-return to mother of 204 million yuan (+162.31%). 2024Q1 achieved operating income of 169 million yuan (+18.12%); net profit attributable to mother of 39 million yuan (+3.34%); net profit after deducting non-return to mother of 36 million yuan (+12.07%).

[Sales to TA Sales BL _ Performance SU Drives MA Revenue Revenue], and profits both increased. In 2023, the company's main business revenue increased 52.23% year-on-year, mainly due to a 56.27% year-on-year increase in rehabilitation and physiotherapy equipment revenue, a 47.75% year-on-year increase in rehabilitation training equipment revenue, and a 67.35% year-on-year increase in rehabilitation assessment equipment revenue. As national policies continue to be strengthened and demand in the rehabilitation medical market grows, the company is expected to maintain this growth trend in performance.

Industry-university-research cooperation and innovation demonstrations have been strengthened, investment in research and development has been increased, and integrated rehabilitation is being built. During the reporting period, the company's “National Enterprise Technology Center” passed a review and was selected as a “National Industrial Design Center”, demonstrating its R&D and innovation capabilities. The company's patents and other core technologies have continued to break through, adding 325 patents, including 32 invention patents; 22 software copyrights; and 77 new medical device registrations/filings. The company continued to increase R&D investment. The annual R&D investment was 10,6747,800 yuan (+15.52%), and the total number of R&D personnel reached 511 (+77), accounting for 28.09%. The company's accumulation of technology and talents is a reserve force for subsequent development. It is expected to continue to innovate R&D and consolidate its leading advantages in R&D. The company hosted the Central Plains Brain Computer Forum in March 2024 and actively cooperated with universities such as Tianjin University to expand brain-computer interface-related products.

The marketing system continues to be optimized, and the market area coverage is further improved. The company's sales expenses in 2023 were 170 million yuan (+20.89%) to further develop the market and expand sales staff. It now covers 31 provincial administrative regions, has a marketing team of more than 700 people, more than 700 agents, and a sound channel sales network.

Sales performance during the reporting period has reflected the scale effect brought about by this, and is expected to increase further in 2024.

Implement equity incentives, actively repurchase shares, and demonstrate confidence in high growth. During the reporting period, the company implemented a restricted stock incentive plan and granted 1.8 million new equity incentives to 265 people. At the same time, in 2023, the company implemented a new round of share repurchases. A total of 1,711 million shares have been repurchased, accounting for 1.0694% of the company's total share capital, and 73.5532 million yuan has been paid, all showing the company's confidence in continued development.

Profit forecast: Taking into account the company's stable expectations for the full year of 2024 and the accelerated development of innovative products, the company's total revenue for 2024-2026 is expected to be 9.34/11.20/1,391 billion yuan respectively, the net profit due to mother is 2.89/355/ 427 million yuan, EPS is 1.80/2.22/2.67, and the corresponding PE is 22.46/18.28/15.19 times, respectively. The valuation is cost-effective and upgraded to a “buy” rating.

Risk warning: Risk of changes in industry policies, product development and promotion falling short of expectations, intensifying competition.