Incident: The new industry released its 2024 interim report. The performance is in line with expectations. In the first half of 2024, the company achieved operating income of 2.211 billion yuan, an increase of 18.54% year on year, with reagent sales up 21.13% year on year and instrument sales up 12.40% year on year; net profit to mother of 0.903 billion yuan, up 20.42% year on year; net profit after deducting non-return mother of 0.868 billion yuan, up 26.36% year on year. 2024H1, the company's comprehensive gross margin was 72.78%, an increase of 1.29 percentage points over the previous year, mainly due to an increase in both the share of reagent revenue and the share of high-margin large-scale instrument sales. Separately, the gross profit margin of reagents was 88.50%, down 0.41 percentage points from the previous year; the gross profit margin of the instrument was 32.11%, up 2.46 percentage points from the previous year; the company's net interest rate was 40.85%, up 0.64 percentage points from the previous year.

In the second quarter, the company achieved operating income of 1.19 billion yuan, up 20.23% year on year; net profit to mother of 0.477 billion yuan, up 20.76% year on year; comprehensive gross profit margin of 71.56%, down 2.06 percentage points year on year, which is mainly expected to be related to the rapid growth in instrument sales in the second quarter; net interest rate was 40.09%, up 0.17 percentage points year on year.

Domestic business: The proportion of mainframe machines installed has further increased.

In the first half of 2024, the company's main business revenue was 1.41 billion yuan, up 16.30% year on year; the gross profit margin of the domestic main business was 77.56%, down 0.49 percentage points year on year. Through the continuous promotion of X series high-speed chemiluminescence instruments 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.

In terms of installed equipment, the 2024H1 added 796 new chemiluminescence devices in the domestic market, and the proportion of large machines installed further increased to 75.13%. By the end of the first half of the year, the company had 1,636 domestic tertiary hospital customers, an increase of 101 (47 of the top three hospitals), and the coverage rate of the top three hospitals reached 60.20%.

In terms of reagents, the share of large machines installed in the domestic market continued to increase, driving steady growth in reagent business revenue. 2024H1 domestic reagent business revenue increased 18.54% year on year.

Overseas business: Increased reagent volumes led to a marked increase in gross margin.

In the first half of 2024, the company's overseas revenue reached 0.796 billion yuan, up 22.79% year on year; the gross profit margin of the main overseas business was 64.33%, up 8.23 percentage points year on year. The company's overseas markets focus on academic excellence and fine management, gradually segmenting overseas markets and implementing a regionalized management model, further improving the breadth and depth of product distribution channel coverage.

In terms of installed equipment, the 2024H1 sold a total of 2,281 chemiluminescence meters in overseas markets. The share of medium and large machines in sales increased to 64.80%, an increase of 10.07 percentage points over the previous year.

In terms of reagents, while the number of installed machines in overseas markets is growing steadily, the share of medium and large machines continues to increase, laying a solid foundation for the growth of overseas reagent sales. 2024H1 overseas reagent business revenue increased 29.11% year on year, which contributed well to the gross margin of overseas business.

Under the wave of domestic substitution, using the double-layer sponge effect as a shield, high-speed instruments+advanced reagents as spears:

In terms of collection, in Anhui Luminescence Collection, all of the company's chemiluminescence testing projects entered Group A and were successfully selected. It is expected that they will use the cost performance advantage to accelerate the market share of imported brands. The company faces a two-tier sponge effect in the face of collection price reduction: 1. The single-level distribution system provides higher channel profit margins, which is conducive to better absorbing the pressure on factory prices caused by falling revenue prices; 2. The self-production+scale effect of raw materials brings high gross profit margins, which is conducive to better absorbing the pressure on the manufacturer's gross profit caused by falling factory prices.

In terms of instruments, the company's chemiluminescence instrument X8 has sold and installed 3170 units at home and abroad.

The company's higher-throughput X10 was released in early 2024, and the SATLARS T8, an open fully automatic sample processing system with completely independent intellectual property rights, and iXLab, the smart laboratory platform, were officially launched, which is expected to drive a new round of equipment updates and help the company seize the high-grade hospital market.

At the reagent level, the company has launched 8 small-molecule double antibody sandwich reagents to the market, mainly covering the fields of hormones, nail function, bone metabolism, etc., breaking through the problems of low sensitivity and poor accuracy currently commonly found in testing small molecules using competitive methods, so that the products have better specificity, sensitivity, precision and linearity, effectively overcome the limitations of competition law itself, and are expected to enter tertiary hospitals as boxing products, and continue to build the company's good brand reputation.

Investment advice:

We expect the company's revenue to increase 25.3%, 26.4%, and 25.4% year-on-year respectively in 2024-2026; net profit to mother will increase by 22.0%, 25.8%, and 24.5%, respectively, with outstanding growth; maintain the investment rating given to Buy-A, and the target price for 6 months is 77.01 yuan, which is equivalent to a dynamic price-earnings ratio of 30 times that of 2024.

Risk warning:

The risk that the company's overseas expansion falls short of expectations, the risk of changes in industry policies, and the risk of further intensification of industry competition.