Core views:

The company's performance was in line with expectations. According to the company's semi-annual report for '24, in the first half of '24, the company's revenue was 0.354 billion yuan (YOY +22.29%); net profit to mother was 0.006 billion yuan (YOY -85.13%), which was due to the company's restricted stock incentive plan and continued increase in manpower investment; gross profit margin of 71.46% (YOY-4.82pp), mainly due to the increase in the company's costs as revenue increased. According to Wind, the company achieved revenue of 0.184 billion yuan (YOY +12.61%) in the 2nd quarter of '24; net profit to mother was 0.003 billion yuan, a year-on-month growth rate of 5.17%.

Overall, corporate rates increased slightly. According to Wind, in the first half of '24, the company's sales expense ratio was 34.69% (YoY+0.52pp), mainly due to an increase in expenses such as employee remuneration and travel expenses; the management expense ratio was 16.6% (YoY+2.69pp), mainly due to an increase in expenses such as share payment of travel expenses; and a 24.7% R&D expense ratio (YOY+0.62pp), mainly due to an increase in employee remuneration and travel expenses.

The company's new products are being iterated one after another to accelerate product entry into overseas markets. According to the company's semi-annual report for '24, in March '24, the company introduced electronic percutaneous cholangioscopy and electronic cystoscopy, moving from the fields of gastroenterology and respiratory medicine to the field of hepatobiliary surgery and urology; in May '24, the company released electronic ureteropyeloscopy. The ultra-fine outer diameter lens can enter narrow ureters to help treat urinary stones. In overseas markets, the company has also made many advances in market entry in various countries or regions such as the European Union, Brazil, South Korea, and Russia.

Profit forecasting and investment advice. The company is expected to achieve revenue of 0.971 billion yuan, 1369 billion yuan, and 1,961 billion yuan in 24-26, and net profit to mother of 0.122 billion yuan, 0.181 billion yuan, and 265 million yuan. EPS is expected to be 0.91 yuan/share, 1.35 yuan/share, and 1.97 yuan/share in 24-26, respectively.

Referring to comparable companies, comprehensively consider factors such as the company's competitive advantage, profitability, and growth (currently the company is in the early stages of product launch, and the company increased market and R&D investment in the first half of '24, so it chose to give the company a PS valuation), giving the company a PS valuation of 6 times over 24 years, corresponding to a reasonable value of 43.30 yuan/share, and give it a “buy” rating.

Risk warning. Risk of core technology leaks, market promotion falling short of expectations, and increased competition for foreign investment.