Incidents:

The company released its 2024 semi-annual report. 2024H1 achieved operating income of 1.001 billion yuan, an increase of 27.03% over the same period of the previous year, and achieved net profit attributable to shareholders of listed companies of 0.343 billion yuan, an increase of 33.09% over the same period of the previous year; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 0.328 billion yuan, an increase of 35.20% over the same period last year. 2024H1 gross sales margin is about 72.75%, and net sales margin is about 33.77%.

2024Q2 achieved operating income of approximately 0.546 billion yuan, an increase of 24.50% over the same period of the previous year, and achieved net profit attributable to shareholders of listed companies of 0.202 billion yuan, an increase of 30.84% over the same period of the previous year; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 0.191 billion yuan, an increase of 25.51% over the same period last year. 2024Q2 gross sales margin is about 73.36%, and net sales margin is about 36.69%.

Comment:

The three major businesses grew steadily. The electrophysiology sector generated 7,500 3D surgeries in the first half of 2024. The overall revenue of the company was about 1.001 billion yuan, of which the electrophysiology sector earned 0.223 billion yuan, accounting for about 22.3%, the coronary sector about 0.503 billion yuan, accounting for about 50.2%, and the peripheral segment revenue was about 0.175 billion yuan, accounting for about 17.5% of revenue. In addition, the company's newly expanded non-vascular intervention business achieved revenue of 0.016 billion yuan, and the revenue volume for the first half of 2024 has reached the full scale of 2023.

Among them, admissions for core electrophysiology products continued to grow with the help of the company's electrophysiology sector collection. In 2023, the company's 3D cold saline ablation catheter achieved more than 10,000 surgeries in 2023, and completed about 7,500 surgeries in the first half of 2024. The company's adjustable 10-pole coronary sinus catheter continued to maintain a leading share in this category market segment. The adjustable curved sheath tube was approved through a volume procurement project, and the usage volume exceeded 5,000 during the reporting period. In terms of admissions, 2024H1 has been implanted in more than 150 new hospitals, covering a total of more than 1,250 hospitals. In terms of production, in the first half of 2024, the company expanded and optimized the production line for electrophysiological consumables, and production capacity increased by more than 50% year-on-year to meet the continuous increase in future demand. In the field of electrophysiological equipment, in 2023, the company launched the RFG20A cardiac radiofrequency ablation instrument and an IP-1 radiofrequency perfusion pump, which were used with a 3D electrophysiological labeling system to achieve full coverage of electrophysiological radiofrequency ablation equipment. Shanghai Hongtong, the company's core equipment subsidiary, achieved revenue of 0.122 billion yuan in the first half of 2024, an increase of about 68% over the previous year, achieved net profit of about 12.8668 million yuan, and profit correction.

The coverage rate and inpatient penetration rate of the company's vascular intervention products have further increased. The number of admissions for coronary products increased by nearly 20% compared to 2023H1, and the number of admissions for peripheral products increased by more than 30%, covering nearly 4,000 hospitals as a whole. In the first half of 2024, Hunan Ept, a core subsidiary of the company, achieved revenue of about 0.766 billion yuan, a year-on-year increase of about 17.7%, and realized net profit of about 0.323 billion yuan, an increase of about 22.8% over the previous year.

With the development of volume procurement work in the country and provinces and cities at all levels, domestic brands have a first-mover advantage and manufacturers with large-scale production capacity can use collection to achieve relatively rapid hospital coverage and enhance their market position. Take coronary pathway products as an example. The company's level of automation and large-scale production capacity have improved markedly in recent years. The company's microcatheters, imaging kits, etc. now occupy a clear leading position. Other products such as guide catheters, guide wires, and balloon catheters are also rapidly rising, and the market share continues to expand. The subsidiary Hunan Ept has expanded production capacity and planned a new factory area (North District Plant). After the North District plant is fully put into operation, the annual production capacity of vascular intervention products can reach 4 billion yuan.

Compared with coronary access products, peripheral vascular interventional therapy is still in the early stages of development in China. Currently, the peripheral vascular intervention market, whether arterial or venous, is dominated by foreign brands, and the domestic product line is still in the stage of product improvement and complementation. At present, the company has formed a complete solution for lower limb interventional surgery pathways. The company's adjustable valve catheter sheath is the first similar product in China to obtain a domestic registration certificate. It can effectively prevent bleeding problems when replacing large devices, and has been widely recognized in the market.

R&D is progressing smoothly. Since its establishment, many products have entered the registration review process. Since its establishment, the company has focused on the field of electrophysiological and vascular interventional medical devices. After more than 20 years of exploration and accumulation, it has mastered many core production processes and product development technologies. By building an industry-leading independent manufacturing platform, electrophysiological system technology platform and product structure innovation, it has formed the company's core technical advantage. As of June 30, 2024, the company had 479 R&D personnel, accounting for 19.78% of the company's total employees. In the first half of 2024, the company's R&D expenses were about 0.134 billion yuan, accounting for about 13.38% of total revenue.

Various products being developed by the company are already in the registration review stage, such as magnetoelectric positioning high-density labeling catheter, magnetoelectric positioning annular labeling catheter, pressure-sensitive radiofrequency ablation system, three-dimensional electrophysiological labeling system pro, magnetic positioning pressure-sensitive radiofrequency ablation catheter, magnetoelectric positioning pressure-sensing pulse ablation catheter, etc. It is expected that the company's deep electrophysiology, vascular intervention and non-vascular intervention production lines will be the driving force for the company's continued growth in the next few years.

Investment advice

We expect the company's revenue for 2024-2026 to be 2.174 billion yuan, 2.882 billion yuan, and 38.29 billion yuan, respectively, with revenue growth rates of 31.7%, 32.6%, and 32.8%, respectively. Net profit to mother in 2024-2026 will reach 0.728 billion yuan, 0.973 billion yuan, and 1.307 billion yuan respectively, with growth rates of 36.4%, 33.6% and 34.4% respectively. 7.48 yuan, 10.00 yuan, and 13.43 yuan, corresponding to 2024-2026 PE are 48x, 36x, and 27x, respectively, maintaining a “buy” rating.

Risk warning

The company's surgical volume expansion falls short of the anticipated risk.

The company's clinical progress in research falls short of the expected risk.