Incidents:

The company released its 2024 mid-year report. 24H1 achieved operating income of 1.001 billion yuan (YoY +27.03%), net profit of 0.343 billion yuan (YoY +33.09%), deducted non-net profit of 0.328 billion yuan (YoY +35.20%); 24Q2 achieved operating income of 0.546 billion yuan (YoY +24.50%), net profit of 0.202 billion yuan (YoY +30.84%), net profit to mother 0.191 billion yuan (YoY +25.51%)

Comment:

1. Domestic performance has grown steadily, and technical upgrades+collection+academic promotion have helped accelerate product admission.

24H1, the company's domestic market revenue was 0.885 billion yuan (+28.05%), of which the electrophysiology business added more than 150 new admissions, and accelerated dosage through the upgrading and promotion of two-dimensional to three-dimensional surgeries. The core products led the market share of adjustable 10-pole coronary sinus catheters, adjustable curved sheath tubes were purchased in volume, and the 24H1 usage exceeded 5,000. In addition, the company actively participated in the Fujian Alliance to comprehensively promote product admissions; the coverage and penetration rate of cardiovascular intervention products were further improved, with the help of Online and offline integrated operation platforms and academic promotion. Among them, the number of admissions for coronary products increased by nearly 20% year-on-year, and the number of admissions for peripheral products increased by more than 30%, covering nearly 4,000 hospitals.

2. Major overseas markets are growing rapidly, with independent brands contributing to the core driver. 24H1, the company's international market revenue was 0.116 billion yuan (+19.73%). Among them, revenue in the CIS region increased 124% year on year, Europe increased 51% year on year, and Asia Pacific, Latin America, Middle East and Africa regions also achieved significant growth; in terms of products, independent brands of electrophysiology increased 63.04% year on year, and revenue from the coronary and peripheral independent brand business increased 43.77% year on year, while OEM business declined 20.18% year on year. With the help of the company's continuous overseas academic promotion and other measures, high-margin own-brand products have accelerated their launch overseas, optimizing the product structure and improving the growth rate of overseas business.

3. Production line optimization promotes further improvement in profit levels, and R&D innovation continues to export long-term reserve growth momentum. The company continues to promote production efficiency optimization and capacity expansion. Within 24H1, production capacity of electrophysiological consumables increased by more than 50% year on year, and vascular intervention production capacity increased 40% compared to 2023; the first phase of the subsidiary Hunan Ept's new plant project has begun to release production capacity, and the second phase of the 25H1 project is expected to be put into operation, which will increase the annual output of vascular intervention by 4 billion yuan in total; in addition, the proportion of the company's self-developed special equipment increased. The efficiency of each major finished product production line increased by 5%, and semi-finished products increased by 10%, enabling continuous optimization of profit levels. 24H1 gross margin reached +72.75% ( 1.02pct), net margin of 33.77% (+1.71pct). In the first half of the year, the company continued to make efforts in research and development, investing 0.134 billion yuan, accounting for 13.38% of revenue. Various products such as thoracic aortic stent systems, contrast catheters, and disposable cardiac electrophysiological testing catheters were certified, further enriching the product matrix and consolidating the company's comprehensive competitiveness in the field of interventional devices such as electrophysiology.

Profit forecast: We expect the company's revenue for 2024-2026 to be 2.234, 2.986, and 3.924 billion yuan, respectively, with year-on-year growth rates of 35.40%, 33.62%, and 31.44% respectively, and net profit to mother of 0.689, 0.934, and 1.244 billion yuan, respectively. The year-on-year growth rates are 29.06%, 35.60%, and 33.11%, respectively. Corresponding to the current stock price PE is 50, 37, and 28 times, respectively, maintaining the “recommended” rating.

Risk warning: R&D and registration progress falls short of expectations, increased risk of market competition, risk of changes in industry policies, risk of price reduction in collection, falling short of expectations in market expansion, risk of changes in the overseas environment, etc.