Revenue increased 15% year over year in 2023, and net profit to mother maintained steady growth. In 2023, the company achieved revenue of 34.932 billion (+15.0%) and net profit of 11.582 billion yuan (+20.6%) to mother. Among them, revenue for the fourth quarter was $7.628 billion (+7.9%), and net profit to mother was $1,748 million (+16.2%). Domestic equipment bidding and procurement activities have been drastically delayed since August, but the in vitro diagnosis and seed business has continued to expand rapidly, and the company's profitability continues to increase. The first quarter of 2024 achieved revenue of 9.373 billion yuan (+12.1%) and net profit of 3.160 billion yuan (+22.9%). In the same period last year, the domestic market as a whole achieved single-digit growth under a high base. Among them, the domestic in vitro diagnosis and medical imaging business, which was suppressed during the same period last year, achieved high recovery growth. Domestic production capacity was skewed in the same period last year, leading to a low international market base. With the help of the continuous acceleration of breakthroughs in high-end overseas customer groups, the overall international market grew by nearly 30% in the first quarter of this year, with developing countries growing by more than 30%.

The in vitro diagnosis business led growth, and the ultrasound business continued to break through the high-end. The life information and support business achieved revenue of 15.255 billion yuan (+13.81%) in 2023. By the end of 2023, the market space to be released for new domestic medical infrastructure still exceeds 20 billion yuan, which is expected to contribute significantly to the growth of this production line. The in vitro diagnosis business achieved revenue of 12.421 billion yuan (+ 21.12%), and its international IVD business had a compound growth rate of more than 30% for two consecutive years. The BC-7500 series has more than 2,000 units installed throughout the year, making it the first product to achieve revenue exceeding 1 billion yuan in the third year of launch. More than 2,000 new chemiluminescence machines were installed in China, with high-speed machines accounting for nearly 60%. For the first time, the domestic market share surpassed that of an imported brand and ranked fourth. The medical imaging business achieved revenue of 7.034 billion yuan (+8.82%). The company released Resona A20, the first domestic ultra-high-end ultrasound platform, and accelerated the breakthrough of high-end overseas customers. High-end overseas ultrasound models grew by more than 25%, helping the ultrasound business achieve the first domestic and third largest industry position in the world.

Gross profit margin increased, and various expense ratios remained stable. Gross profit margin of 66.16% (+2.01pp) in 2023; sales expense ratio and management expense ratio remained stable, while maintaining high R&D investment, R&D expenditure ratio of 9.83% (+0.20pp) and R&D investment of 3.779 billion (+18.43%); financial expense ratio decreased by 0.96pp, mainly due to increased interest income; net profit margin of 33.15% (+1.50pp) further enhanced profitability.

Investment advice: The company benefits from new medical infrastructure and product iterative upgrades domestically, and accelerates the expansion of high-end customers overseas. Seed businesses such as minimally invasive surgery and cardiovascular medicine are being rolled out rapidly, and the “Sanrui” digital intelligence program is leading the transformation and upgrading. Taking into account the impact of industry policies and Huitai Healthcare, the 2024-25 net profit forecast was maintained, and the 2026 profit forecast was added. The 2024-26 net profit returned to mother was 139.79/168.85/20.301 billion yuan, a year-on-year growth rate of 20.7%/20.8%/20.2%. The current stock price corresponds to PE = 26.4/21.9/18.2x. As a domestic medical device leader, the company has strong R&D and sales capabilities and remarkable international layout results. It will rapidly grow into a leading global medical device and maintain a “buy” rating.

Risk warning: collection policy risk, exchange rate fluctuation risk, medical equipment procurement progress falling short of expectations.