Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 20.531 billion yuan, up 11.12% year on year; net profit to mother was 7.561 billion yuan, up 17.37% year on year, after excluding the impact of exchange profit and loss, up 22.13% from the same period last year; net profit after deducting the impact of exchange profit and loss; net profit after deducting non-return to mother of 7.38 billion yuan, an increase of 16.39% year on year.

On a quarterly basis, in the second quarter of 2024, the company achieved revenue of 11.158 billion yuan, a year-on-year increase of 10.35%, a year-on-year increase of 4.401 billion yuan, an increase of 13.69% over the same period of the previous year, after excluding the impact of exchange gains and losses; net profit after deducting non-return income was 4.343 billion yuan, an increase of 13.94% year on year. Affected by external factors such as medical rectification, the company's domestic business grew steadily, and the overseas trend continued to be good.

Domestic life information and support services are under slight pressure due to policy disturbances, and the penetration rate of high-end overseas customers has further increased.

In the first half of 2024, Life Information and Support achieved revenue of 8.009 billion yuan, a year-on-year decrease of 7.59%. Among them, minimally invasive surgery grew by more than 90%, hard mirror systems doubled, and high-value consumables businesses such as ultrasound knives began to gradually expand.

Since 2024, domestic medical rectification and medical equipment renewal projects have delayed in-hospital equipment bidding activities in the first half of the year. By the end of June 2024, the business opportunities to be released for new domestic infrastructure had risen to more than 24 billion yuan. It is expected that related procurement demand will gradually be released after policy relaxation. At the same time, the company actively explores new space for sustainable growth through epitaxial mergers and acquisitions, and the 2024H1 merger and acquisition of Huitai Medical, a leading domestic producer of microelectrophysiology, has successfully entered the cardiovascular market and strengthened joint efforts to enhance comprehensive product capabilities. Overseas markets have benefited from the rapid promotion of high-performance products. The company has entered more high-end hospitals in developed countries such as the US, the UK, and France, driving related businesses to achieve double-digit growth. It is expected that overseas business will continue to grow steadily and rapidly in the future.

Demand for IVD is recovering rapidly, and the installation of high-end equipment continues to accelerate. In the first half of 2024, the company achieved revenue of 7.658 billion yuan in vitro diagnostics, an increase of 28.16% over the previous year, of which the chemiluminescence business grew by more than 30%. As demand for diagnosis and treatment continues to recover, the consumption of diagnostic reagents has risen rapidly. 2024H1's domestic IVD business has grown by more than 25%, with the blood cell business growing at more than 30%, further consolidating its leading position in the market. In the field of chemiluminescence, the installed capacity of the company's new MT8000 assembly line has exceeded 100, and 90% has been installed in tertiary hospitals. With the launch of new intelligent assembly lines and allied production volume, the company's market share in the luminescence market has steadily increased, and is expected to surpass an imported brand. In overseas markets, the company accelerated the acquisition and integration of the DiaSys platform to help increase the penetration rate of large sample customers. It successfully broke through more than 60 overseas third-party chain laboratories in the first half of the year, and completed the installation of the first MT 8000 assembly line, helping the 2024H1 overseas IVD business achieve high growth of more than 30%.

High-end ultrasound has excellent performance, and the leading position in the industry is stable. In the first half of 2024, the company achieved revenue of 4.274 billion yuan in medical imaging, an increase of 15.49% over the previous year, with high-end ultrasound models growing by more than 40%. Constrained by policy factors such as industry rectification, domestic imaging equipment procurement demand weakened in the first half of 2024, and all major imported brands experienced a decline in the first half of the year. The company's high-end products such as Resona A20 still performed well. It is expected that after applying ultra-high-end ultrasound in obstetrics and gynecology at the end of the year, the company's share in the ultra-high-end market is expected to further increase, driving the domestic imaging business to maintain a good growth trend; in the international market, the company promptly adjusts its marketing strategy to increase the coverage and investment in overseas high-end markets and further consolidate the third largest industry position in the world.

Profit forecast and investment suggestions: According to the company announcement, we expect the company's domestic market to grow rapidly in the future under trends such as new medical infrastructure and in-hospital diagnosis and treatment recovery, and overseas high-end customers are expected to continue to break through, but domestic policy changes may cause uncertainty in the short term. The company's revenue is expected to be 40.162, 48.202, and 57.857 billion yuan in 2024-2026 (before adjustments of 41.922, 50.318, 60.399 billion yuan), an increase of 15%, 20% over the previous year; the company's net profit is expected to return to mother 13.914, 16.758, 20.1 billion yuan (13.937, 16.783, 20.137 billion yuan before adjustment), with year-on-year increases of 20%, 20%, and 20%. The company's current stock price corresponds to 20, 17, and 14 times PE in 2024-2026. Considering that the company is a leading domestic medical device company, the domestic market dominates, and overseas products continue to be released rapidly, maintaining a “buy” rating.

Risk warning events: New product development risks, policy change risks, increased risk of industry competition, risk that public data used in research reports may be delayed or not updated in a timely manner, etc.