Incident: On August 20, the company released its 2024 semi-annual report. The first half of 2024 achieved operating income of 0.214 billion yuan, an increase of 32.49% year on year; net profit to mother was 0.008 billion yuan, up 125.88% year on year, turning loss into profit; net profit without return to mother - 0.013 billion yuan, reversing the year-on-year loss of 0.022 billion yuan.

Among them, revenue for the second quarter of 2024 was 0.123 billion yuan, up 39.17% year on year; net profit to mother was 0.005 billion yuan, up 138.53% year on year, turning loss into profit; net profit after deducting non-return to mother was 0.005 billion yuan, up 135.36% year on year, turning a loss into a profit.

Coronary collection and release helped increase performance. Overseas sales were steadily expanded in the first half of 2024. Revenue from the coronary intervention business increased 70.77% year-on-year, mainly due to the sharp increase in sales of two coronary stent products that have entered the collection range and sales of coronary balloon products. The sales volume of the company's coronary stent products in the first half of 2024 exceeded the volume collected in 2024, a significant increase over the same period last year. Furthermore, in the Beijing-Tianjin-Hebei 28 consumables collection that began in December 2023, the company won the bid for the coronary artery spinous balloon dilatation catheter and catheter guide tube in this collection, which greatly promoted the in-hospital sales of the company's new coronary artery spinous balloon dilatation catheter.

In the first half of 2024, the company's HT Supreme drug-eluting stent system successively obtained overseas registration certificates in countries and regions such as Bangladesh, Hong Kong, China, South Korea, Belarus, and Mexico; the company's coronary balloon dilatation catheter (SC HONKYTONKTM) and NCROCKSTART) obtained overseas registration certificates in Pakistan and South Korea respectively, further expanding the scope of overseas sales of the company's coronary products.

Neural intervention leads innovation, and new product development progresses according to plan

In the first half of 2024, revenue from the neurointerventional business increased by 2.74% year-on-year, mainly due to the combined effects of factors such as a decrease in unit price and sales volume of neurointerventional balloon products compounded by increased sales of intracranial stents and 9 new neurologic products. The company's neurological intervention business adheres to the strategic leadership of “deepening ischemia, innovating bleeding, and breaking through pathways”, and has achieved a differentiated layout of all categories in acute ischemia, stenotic ischemia, hemorrhage and pathways. The company's new product development is progressing according to plan, and the commercialization of the two major products can be expected: 1) Intracranial self-inflating drug stents: Complete all clinical follow-up, and the results are in line with expectations. At the same time, the product was approved as a national innovative device as the world's first intracranial self-inflating drug stent system. This product has been submitted for registration and accepted; 2) Coated dense mesh stents: All clinical trials have been completed, and the results are in line with expectations. Registration submission is expected in the second half of 2024.

The scale effect helped increase gross profit, and the cost ratio declined significantly during the period

In the first half of 2024, the company's comprehensive gross margin increased by 1.46 pct to 59.20% year on year, mainly due to the scale effect brought about by the sharp year-on-year increase in sales of balloon and stent products. The sales expense ratio, management cost rate, and R&D expense ratio were 17.32%, 19.86%, and 31.95%, respectively. The year-on-year decreases were 2.22pct, 11.28pct, and 0.55pct, respectively. Under the combined influence, the company's overall net interest rate increased by 24.54 pct to 4.57% year-on-year.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 0.47 billion/ 0.699 billion/ 0.982 billion yuan, with year-on-year growth rates of 37%/49%/41%, respectively; net profit to mother is 0.014 billion/ 0.036 billion/ 0.089 billion yuan, respectively, up 137%/145%/150%, respectively; EPS is 0.04/0.09/0.21, respectively According to the closing price on August 20, 2024, it corresponds to 216 times PE in 2024. Maintain a “buy” rating.

Risk warning: Risk of failure or delay in registration of new products, risk of loss of technological talent, risk of infringement of important patents and technology, risk of collection policies, risk of market competition, risk of uncertainty in the launch of new products.