Introduction to this report:

The company continues to explore domestic and overseas markets, installed equipment is progressing smoothly, and the share of medium and large machine sales has increased, driving a good reagent growth trend. Rapid growth is expected to continue, maintaining an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. Maintain the 2024-2026 EPS forecast of 2.69/3.49/4.55 yuan, maintain the target price of 79.65 yuan, corresponding to 2024 PE 30X, and maintain the holdings increase rating.

The performance was in line with expectations. The company achieved H1 revenue of 2.211 billion yuan (+18.54%), net profit of 0.903 billion yuan (+20.42%), net profit of 0.868 billion yuan (+26.36%), including Q2 revenue of 1.19 billion yuan (+20.23%), net profit of 0.477 billion yuan (+20.76%), net profit to mother of 0.468 billion yuan (+27.11%), in line with expectations. H1 reagent revenue of 1.591 billion yuan (+21.13%), gross profit margin of 88.50% (-0.41pct) remained stable, and instrument revenue of 0.615 billion yuan (+12.40%). As the sales share of X series and medium to large light-emitting instruments increased, gross margin increased to 32.11% (+2.46pct). Product structure optimization led to a 1.29pct increase in gross margin of the main business to 72.78%, and net profit margin increased 0.64pct to 40.85%.

Installed capacity in the domestic market progressed smoothly, and mainframes and assembly lines led to a steady increase in reagent revenue.

2024H1, domestic main business revenue 1.41 billion yuan (+16.30%). Through the continuous promotion of high-speed X8/X6 and assembly line products, the company has effectively expanded the number of large-scale domestic medical terminal customers, which has led to a steady increase in sales of conventional reagents. As of 2024, the number of tertiary hospitals serving H1 increased by 101 compared to the end of 2023. In 2024, 796 light-emitting devices were installed in the H1 domestic market, accounting for 75.13% of the installed capacity of large machines. The share of installed mainframe machines in the domestic market continues to rise, driving a steady increase in reagent revenue. H1 reagent revenue increased 18.54% year-on-year, and the growth trend is good. Domestic business gross profit margin 77.56% (-0.38pct).

The trend of reagent intake in overseas markets is improving, and high growth is expected to continue. 2024H1, overseas main business revenue 0.796 billion yuan (+22.79%). Overseas markets are gradually segmented, a regionalized management model is implemented, and the quality of regional services is comprehensively improved. We will continue to increase localization in key countries and establish new overseas subsidiaries in Indonesia. In total, wholly-owned subsidiaries have been set up in 10 key overseas countries. Localized operations will accelerate the growth of business in key overseas regions. The 2024H1 sold a total of 2,281 light-emitting instruments in overseas markets, and the sales share of medium and large light-emitting instruments increased to 64.80% (+10.07pct); while the number of installed units in the overseas market grew steadily, the share of medium and large machines continued to increase, laying a solid foundation for the growth of overseas reagent sales. Revenue from the H1 reagent category increased 29.11% year on year, and the growth trend is good. The increase in the share of medium and mainframe sales and the increase in the share of reagents led to an increase in overseas gross margin of 4.89pct to 64.33%.

Risk warning: New product launches and promotions fall short of expectations; risk of price reduction in product collection