Incident: On August 23, the company released its 2024 semi-annual report: operating income of 2.211 billion yuan in the first half of the year, up 18.54% year on year; net profit to mother 0.903 billion yuan, up 20.42% year on year; after deducting non-net profit of 0.868 billion yuan, up 26.36% year on year; net operating cash flow of 0.618 billion yuan, up 17.46% year on year.

Among them, revenue for the second quarter of 2024 was 1.19 billion yuan, up 20.23% year on year; net profit to mother was 0.477 billion yuan, up 20.76% year on year; net profit after deducting non-net profit of 0.468 billion yuan, up 27.11% year on year; and net operating cash flow was 0.357 billion yuan, up 2.82% year on year.

The growth trend is good. The next-generation X series light-emitting instruments and assembly line products performed well in the first half of 2024. The company continued to improve its ability to serve medium and large medical terminal customers and launched the SATLARS T8 assembly line product and smart laboratory platform iXLab; the higher-throughput MAGLUMI X10 chemiluminescence immunoassay instrument was released in February 2024, which is about to bring a new and more efficient user experience to medical terminals. The company is firm in its development strategy and continues to explore domestic and overseas markets:

(1) In terms of domestic business, ① Revenue: In the first half of 2024, the main domestic business revenue was 1.41 billion yuan, up 16.30% year on year. Its revenue from the reagent business in China increased 18.54% year on year, higher than the overall growth rate of domestic business, and the growth trend is good.

② Installed capacity: In the first half of 2024, 796 fully automatic chemiluminescence instruments were installed in the domestic market, accounting for 75.13%; the proportion of large machines installed in the domestic market continued to increase, driving a steady increase in revenue from the reagent business.

③ Terminal: The company continued its sales strategy in the domestic market and effectively expanded the number of large-scale domestic medical terminal customers through continuous promotion of high-speed chemiluminescence analyzers MAGLUMI X8, MAGLUMI X6 and assembly line products. As of the end of June 2024, the number of tertiary hospitals served by the company increased by 101 compared to the end of 2023.

(2) In terms of overseas business, ① Revenue: In the first half of 2024, overseas business achieved main business revenue of 0.796 billion yuan, up 22.79% year on year. Among them, revenue from overseas reagent business increased 29.11% year on year, higher than the overall growth rate of overseas business, and the growth trend is good.

② Installed capacity: In the first half of 2024, a total of 2,281 fully automated chemiluminescence instruments were sold in overseas markets. The sales share of medium and large light-emitting instruments increased to 64.80%, an increase of 10.07 percentage points over the same period last year; while the number of installed units in overseas markets grew steadily, the share of medium and large machines continued to increase, laying a solid foundation for overseas reagent sales growth.

③ Terminal: The company continues to increase localization in key countries and establishes a new Indonesian overseas subsidiary in the first half of 2024. By the end of June 2024, the company has established wholly-owned subsidiaries in 10 key overseas countries. Localized operations will accelerate the growth of business in key overseas regions.

Furthermore, with the successive launches of MAGLUMI X3, MAGLUMI X6 chemiluminescence instruments and SATLARS T8 assembly line products, the company's next-generation X series fully automated chemiluminescence instruments and assembly line products have been serialized, with excellent performance and high cost performance advantages, providing important product support for the company to develop various types of terminals at home and abroad. By the end of June 2024, the company's MAGLUMI X8 had sold 3,170 units at home and abroad.

The revenue share of X series and medium to large light emitting instruments increased markedly. In the first half of 2024, as the sales share of X series and medium and large light emitting instruments increased, the gross margin of the company's instrument products increased by 2.46 pcts to 32.11% year on year, of which the gross margin of overseas instruments increased 6.31 pcts to 39.95% year on year; the gross margin of domestic and overseas reagent products remained stable; the comprehensive gross margin of the company's main business was 72.78%, an increase of 1.29 percentage points year on year.

In terms of period expenses, the sales expense ratio decreased by 2.39 pct to 15.11% year on year in the first half of 2024. We expect mainly due to strict domestic control of marketing expenses and the fact that the peak layout of domestic and foreign sales offices has passed; the management cost ratio decreased by 0.39 pct to 2.60% year over year; the R&D cost ratio increased by 0.02 pct to 9.24% year on year; the financial expenses ratio increased 1.12 pct to -0.57% year on year, mainly due to changes in exchange profit and loss; under the combined influence, the company's overall net interest rate increased 0.64 pct year on year to 40.85%.

Among them, the comprehensive gross profit margin, sales expense ratio, management expense ratio, financial expense ratio, and overall net interest rate for the second quarter of 2024 were 71.56%, 14.68%, 2.38%, 8.65%, -0.81%, and 40.09%, respectively, with changes of -2.06pct, -5.64pct, -1.16pct, -0.33pct, +2.70pct, and +0.18pct, respectively.

Profit forecast and investment rating: We maintain our original expectations. We expect the company's 2024-2026 revenue to be 4.915 billion/ 6.157 billion/ 7.666 billion yuan, respectively, with year-on-year growth rates of 25%/25%/25%; net profit to mother is 2.07 billion/ 2.595 billion/ 3.242 billion yuan, respectively, up 25%/25%; EPS is 2.63/ 3.30 /4.13, corresponding to 24 times PE in 2024 according to the closing price on August 23, 2024. We believe that the company is expected to maintain rapid and steady growth and maintain a “buy” rating in both domestic and foreign markets in the future.

Risk warning: There is a risk that the price reduction in collection exceeds expectations, the level of competition intensifies the risk, the risk that R&D progress falls short of expectations, and the risk of fluctuations in overseas markets.