Incident Overview

The company released its 2024 semi-annual report. The first half of 2024 achieved operating income of 0.354 billion yuan, a year-on-year increase of 22.29%; net profit to mother of 5.6616 million yuan, a year-on-year decrease of 85.13%; net profit after deduction of 1.3458 million yuan, a year-on-year decrease of 104.55%.

Among them, 2024Q2 achieved operating income of 0.184 billion yuan, a year-on-year increase of 12.61%; net profit to mother was 2.9021 million yuan, a year-on-year decrease of 86.52%; net profit after deducting non-attributable net profit of 1.1003 million yuan, a year-on-year decrease of 106.32%.

The performance is in line with expectations, and the cost rate has increased

2024H1's revenue increased 22.29% year over year, mainly due to the company increasing product promotion and product upgrades to increase hospital coverage. We expect the company's revenue to continue to rise as equipment renewal policies are gradually implemented and equipment tenders improve in the second half of the year.

The 2024H1 company's gross profit margin was 71.5% (-4.8pct), and the sales expense ratio, management expense ratio, and financial expense ratio were 34.7%/16.6%/24.7% (+0.5pct/+2.7pct/+0.6pct), respectively. The increase in sales expenses was mainly due to the increase in employee remuneration and travel and the increase in amortization and repair costs due to higher investment in prototypes; the increase in management expenses was mainly due to increased expenses such as share payment of travel expenses.

Continuously promoting product iterative upgrading, the product pipeline has made many advances. 2024H1 invested 87.3368 million yuan (+ 25.48%) in R&D, and the R&D cost rate was 24.70% (+0.62pct). The company continues to promote product iterative upgrading and promote the development of innovative technology. A number of developments have been made in the product pipeline. In March 2024, the company successively launched 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 2024, the company released an electronic ureteropyroscope. The ultra-fine outer diameter lens can enter a narrow ureter to help treat urinary stones.

Investment advice

Considering changes in the market policy environment, we adjusted the company's profit forecast. The company's revenue for 2024-2026 is 0.958/1.403/2.006 billion yuan (original value was 1.002/1.426/2.018 billion yuan), net profit to mother is 0.043/0.167/0.278 billion yuan (original value was 0.112/0.185/0.283 billion yuan), and EPS is 0.32/1.24/2.06 billion yuan (original value) (0.83/1.38/2.11 yuan), corresponding to the closing price of 38.83 yuan on August 26, 2024, PE was 121/31/19 times, respectively, maintaining the “gain” rating.

Risk warning

Market promotion falls short of expectations, R&D progress falls short of expectations, market competition heightens risks