Incident: The company released the 2024 semi-annual report. 2024H1 achieved operating income of 0.21 billion yuan (+32.5%) and net profit to mother of 0.008 billion yuan (+125.9%), turning a loss into a profit; among them, 2024Q2 operating income was 0.12 billion yuan (+39.2%); net profit to mother was 0.005 billion yuan (+138.5%), which turned a loss into a profit, and the performance was in line with expectations.

The 24H1 revenue growth rate was significant, mainly driven by coronary intervention business. The 24H1 revenue of the coronary intervention business was 0.12 billion yuan (+70.8%), mainly due to significant increases in sales of the two types of coronary stent products entering the collection range and sales of coronary balloon products in the second year of implementation of the national two-round coronary stent volume centralized procurement policy; 1) On a quarterly basis, 24Q1/Q2 revenue for a single quarter was 0.09/0.12 billion yuan (+24.5%/+39.2%); 2) In terms of profitability, the gross margin of 2024H1 was 59.2%, mainly for balloons and stents This is due to the scale effect brought about by the sharp year-on-year increase in product sales. The sales expense ratio was 17.3%, the management expense ratio was 19.9%, the R&D expense ratio was 31.9%, and the financial expense ratio was 1%. The cost ratio decreased significantly.

Neurointerventions are entering the harvest period one after another, and many blockbuster products have opened up the growth ceiling. The revenue of the neurointerventional business was 0.091 billion (+2.7%), mainly due to a combination of factors such as a decrease in unit price and sales volume of this neurointerventional balloon product and the increase in sales volume of intracranial stents and 9 new neurologic products. The company's neurointerventional product research projects cover ischemia, hemorrhage and pathways in the field of neurological intervention. In the future, 2 major products will help the company open up the growth ceiling one after another. 1) Intracranial self-inflating drug stents: expected to be launched in 2024Q4, mainly used for intracranial atherosclerotic stenosis surgery; 2) Dense mesh stents: Using a novel alloy material, they can be fully displayed under X-rays. Some specifications of this product are compatible with 0.017in microcatheter release, which can treat aneurysms in small and medium blood vessels at the distal end of the brain. It is expected that 2025H1 will obtain a registration certificate, and commercialization can be expected in the future. The two products are expected to be released over 25 years. At the same time, since various neurological intervention products (such as embolization stents, hemorrhagic products, and pathway products) are being collected one after another, it is expected that there will be pressure to reduce the collection price of neurological intervention products in the future. However, since the competitive pattern of product lines in some sub-fields is still good and highly innovative, future declines in factory prices and gross margin are manageable. Considering the current growth cycle of neural intervention, industry beta still exists.

Promote overseas sales and accelerate the international layout. The internationalization strategy is one of the company's important measures to deal with the normalization of domestic intervention in the collection of consumables. The company continues to lay out overseas organizational structures, talent development, market expansion, product registration, clinical trials, and overseas cooperation. Currently, the company has developed overseas business in mature markets such as Europe and America, as well as emerging markets such as Southeast Asia and Africa. Various coronary intervention products have obtained registration certificates in Europe, the United States, South Korea, Singapore and other countries, and are gradually cooperating with local dealers.

Profit forecast and valuation suggestion: The compound revenue growth rate of the company is expected to reach 48.3% in 2024-2026.

Considering the clear trend in the amount of coronary stents released after collection, and that the company's neurological intervention products are entering the harvest period, the company's performance is expected to usher in a recovery period. A PS valuation of 8 times in 2024 was given, corresponding to a target price of 8.87 yuan, maintaining the “buy” rating.

Risk warning: risk of failure or delay in registration of new products, risk of supply of important raw materials, risk of overseas market operation and exchange rate risk.