Incidents:

On August 30, 2024, the company released its 2024 semi-annual report. 2024H1, the company's revenue was 0.338 billion yuan (YOY +0.93%); net profit attributable to mother was 56.6359 million yuan (YOY -47.37%); net profit after deducting non-attributable net income was 53.4371 million yuan (YOY -43.62%).

2024Q2, the company's revenue was 0.169 billion yuan (YOY -11.92%); net profit attributable to mother was 17.562 million yuan (YOY -74.84%); net profit after deducting non-attributable net income was 16.9543 million yuan (YOY -72.75%).

Comment:

2024H1 revenue remained flat year on year, and net profit declined year on year.

2024H1, the company's revenue was 0.338 billion yuan (YOY +0.93%); net profit due to mother was 56.6359 million yuan (YOY -47.37%); net profit after deducting non-return to mother was 53.4371 million yuan (YOY -43.62%), mainly due to the fact that the company continued to increase investment in R&D and sales activities in the first half of the year. R&D expenses, sales expenses, management expenses, etc. all increased, resulting in a decrease in net profit. 2024H1 has R&D expenses of 65.6683 million yuan (YOY +38.37%), sales expenses of 94.5791 million yuan (YOY +21.00%), and management expenses of 23.9728 million yuan (+43.51%). 2024H1's gross profit margin was 68.22%, up 0.61 pct year on year; net profit margin was 16.75%, down 15.66 pct year on year.

Continue to increase investment in R&D and deepen collaborative innovation between industry, academia, research and use

2024H1 invested 65.6683 million yuan (YOY +38.37%) in R&D, accounting for 19.44% of revenue, an increase of 5.26pct over the previous year. At the same time, the company focuses on industry-university-research cooperation and signed a contract with Xi'an Jiaotong University to jointly establish a rehabilitation medical device research institute.

2024H1 added 6 new medical device registration/filing certificates, and obtained a total of 324; added 199 patents, including 52 invention patents, with a total of 1,702 patents; added 19 software copyrights, with a total of 160; and added 61 provincial scientific and technological achievements, with a total of 185.

The company's 16 products, including the piezoelectric shock wave therapy device, 2 products including Ruihe Medical's extracorporeal shock wave therapy device, and 3 products, including the Henan Jiayu Transcranial Magnetic Body Electrotherapy Device, were selected for the Henan Medical Equipment Application Promotion Guide Catalogue. The company successfully selected 3 categories and 24 models of medical rehabilitation equipment, including extracorporeal shock wave therapy devices, multi-joint active passive training devices (selected name: active passive exercise rehabilitation machine), and fumigation therapy machines (selected name: traditional Chinese medicine fumigators), and the 10th batch of excellent domestic medical equipment product catalogue. In addition, the company has also begun to deploy brain-computer interfaces.

Investment advice: Maintaining a “buy” rating

The company's revenue for 2024-2026 is expected to be 0.919/1.128/1.384 billion yuan (previous value was 0.93/1.154/1.434 billion yuan), with revenue growth rates of 23.4%, 22.7% and 22.7%, respectively. Net profit to mother in 2024-2026 will achieve 0.2/0.268/0.332 billion yuan respectively (previous value was 0.269/0.339/0.426 billion yuan), with growth rates of -11.8%, 33.9% and 23.6%, the 2024-2026 EPS is expected to be 1.25/1.68/2.07 yuan, respectively, and the 2024-2026 PE is 31x/23x/19x respectively. The company is a leading domestic rehabilitation medical device enterprise, with a large first-mover advantage, a full range of categories, wide channels, low cost, and initial formation of a brand effect, maintaining a “buy” rating.

Risk warning

Technological innovation risk; risk of customer change, loss, and management.