Event: The company released its 2024 semi-annual report: achieved revenue of 0.22 billion yuan (-17.7% YOY), net profit attributable to mother 0.071 billion yuan (-21.0% YOY), and net profit excluding non-return to mother 0.065 billion yuan (-24.6% YOY).

Among them, 2Q24 achieved revenue of 0.103 billion yuan (-13.9% YOY), net profit to mother of 0.032 billion yuan (-21.4% YOY), and net profit of 0.028 billion yuan after deducting non-return to mother (-28.3% YOY).

Comment:

Affected by the slowing pace of delivery by major customers, short-term revenue showed a decline, waiting for the company's delivery level to return to normal.

There was a marked decline in the company's revenue in the first half of '24, mainly due to US customers slowing down the pace of receiving goods from the company in order to reduce inventory levels, which led to a short-term decline in the company's revenue. Sales of next-generation endoscopic systems from major customers continue to grow, customer inventories are gradually being digested, and the company's delivery level is expected to return to a normal pace in the future.

The complete endoscope market feedback is good, and we are actively supporting the development of epitaxial products. The company's second-generation 4K endoscope system began mass production and sales after the Spring Festival. More than 100 sets were shipped, and market feedback was good. In terms of endoscopes, the company continues to develop a full set of products (cameras, light sources, various lenses), and also actively supports the development of epitaxial products such as rotary cutting, electric cutting, and instruments to provide customers with comprehensive products and services, continuously improve the product matrix, and enhance market competitiveness.

Deepen ODM business and increase independent brand promotion and sales efforts. In terms of lenses, the company continues to expand the scope of cooperation with American customers, gradually expanding from the original laparoscopy to the fields of urinary, gynecology and open surgery. In the second half of the year, it will support American customers to achieve mass production of 4mm hysteroscopes, as well as the development of 2.9mm cystoscopes and 3mm pediatric laparoscopes to open surgical exoscopes. The company will accelerate production capacity building and related certification of its Thai subsidiary, and form an industrial collaboration chain between its headquarters, Thai subsidiary, and US subsidiary. In terms of the complete machine, the company will complete clinical parameter debugging of the second-generation endoscopy system, cooperate with the national market promotion, and complete the development of the 3D endoscope system.

Profit forecast, valuation and rating: Considering the slowing pace of delivery of goods from major customers, we lowered the company's 24-26 net profit forecast to 0.193/0.255/0.333 billion yuan, respectively (down 8.4%/7.8%/7.2% from the previous forecast), and PE corresponding to the current price was 18/13/10 times, respectively. Sales of new products to the company's major customers continue to grow, and the company's complete machine business is expected to contribute to growth and maintain a “buy” rating.

Risk warning: New orders fall short of expectations; promotion of new products falls short of expectations; risk of trade friction, etc.