Incident: The company released its 2024 semi-annual report, and the 24Q2 results exceeded expectations. The company's 24H1 revenue was 6.997 billion yuan, an increase of 26.11%; net profit to mother was 1.15 billion yuan, an increase of 32.23%. Among them, 24Q2's quarterly revenue was 3.973 billion yuan, an increase of 20.37%; net profit to mother was 0.786 billion yuan, an increase of 30.92%. The company's 23H1 exchange revenue was nearly 67 million yuan, and the 24H1 exchange loss was more than 40 million yuan. On the basis of the high exchange base during the same period, the company still achieved growth of more than 30% in 24Q2, exceeding expectations.

Revenue and orders in the distribution sector are growing steadily, and we are optimistic about the company's overseas power distribution growth space. By business, 1) Intelligent electricity distribution: 24H1 electricity distribution sector revenue was 5.38 billion yuan, an increase of 26% over the same period, and net profit of 0.971 billion yuan, an increase of 29%. As of 24H1, the company had accumulated orders of 14.894 billion yuan, an increase of 25.74% over the same period. Among them, overseas and domestic orders accumulated 6.22 billion yuan/8.675 billion yuan, an increase of 40.47%/16.94%. The company has built five major overseas production bases in Brazil, Indonesia, Poland, Germany and Mexico. Overseas bases account for about 50% of production capacity. Furthermore, the integration of the company's German base is progressing steadily, and the German market has signed small-batch orders. There is a high degree of collaboration between overseas distribution channels and overseas meters. The strategy focuses on the Middle East, Europe and Latin America markets, and is optimistic about the company's overseas distribution development potential.

2) Medical services: The 24H1 medical sector's revenue was 1.613 billion yuan, an increase of 27%, and net profit was 0.183 billion yuan, an increase of 61%. Among them, rehabilitation medical revenue was 0.814 billion yuan, an increase of 37% over the same period, accounting for 50% of the revenue of the medical sector. Currently, the number of hospitals under the company is 34, including 28 rehabilitation hospitals.

The gross margin increased sharply in 24Q2, and the company's gross margin is expected to remain stable year-on-year throughout the year. 1) Margin side: 24H1's gross margin increased by 3.49pct to 34.61%, of which 24Q2 gross profit margin was 37.21%, +5.6pct year over year, and +6.0pct month-on-month. The gross margin increased significantly in a single quarter. We expect the company to continue to promote technological innovation and internal cost reduction and efficiency measures, with significant cost reduction results.

We anticipate that the upward trend in the gross margin of the company's products may continue. 2) Rate side: 24Q2 The company's sales/management/ R&D/ finance rate is about 6.6%/5.5%/4.3%/0.9%, +0.7/+0.3/+2.7pct year-on-year. The sales rate has increased slightly. We expect the company's overseas business to continue to explore new markets, continue to promote the development of new products, and maintain upfront cost investment on the sales side. The increase in financial rates was mainly due to large year-on-year fluctuations in exchange gains and losses. 23H1 exchange income was nearly 0.067 billion yuan, and 24H1 exchange loss was 0.04 billion yuan. 3) Net interest rate: 24H1 company's net interest rate increased 0.76pct to 16.49%; 24Q2 net interest rate 19.88%, 1.69pct increase, 7.83pct month-on-month.

Profit forecasting and investment advice. We slightly raised our profit forecast. We expect the company to achieve net profit of 2.45/2.97/3.586 billion yuan in 2024-2026, an increase of 28.7%/21.2%/20.8%. Based on the market value of August 26, 2024, Samsung Healthcare 2024E PE is valued at about 17.6 times. The company's performance is steady, there is broad room for overseas power distribution growth, and it maintains a “buy” rating.

Risk warning: Domestic and foreign electricity meter and distribution tenders fall short of expectations, risk of policy changes, risk of delivery delays, and medical business progress falling short of expectations.