The company's 1H24 revenue growth rate was slightly weak, mainly because the domestic business grew slowly due to industry restructuring, while the overseas business continued to maintain steady growth. At present, large-scale procurement related to equipment renewal has not started, and the company's 2H24E performance will largely depend on the progress of policy implementation. Furthermore, the company announced an interim dividend of RMB 4.06 per share (dividend rate of 1.8% based on the closing price on the day of the announcement) and intends to continue increasing the dividend ratio. Maintain the “buy” rating and adjust the target price to RMB 350.

1H24 Overseas business is steady, and domestic business is slightly weak due to industry restructuring; excluding the impact of exchange gains and losses, the net profit growth rate of return to mother is still > 20%. 1H/2Q24 revenue +11%/+10% (domestic +7%, overseas +18%/+16%), of which 1H24 1) life information and support revenue -8%; 2) in-vitro diagnosis revenue +28%; 3) medical imaging revenue +16% year over year.

2Q24 as a whole continued the 1Q24 trend of “overseas is better than domestic, consumables are better than equipment”, mainly due to delays in equipment procurement tenders in the context of the restructuring of the domestic medical industry, and procurement related to equipment renewal projects has not been implemented on a large scale, which has not effectively boosted the growth of domestic orders.

1H/2Q24 gross margin was +0.7 pcts/+1.6 pcts year over year. In addition, the three period rates were -2.7 pcts/-4.1 pcts year over year, driving 1H/2Q24 to mother net profit +17%/+14% year over year. If the impact of exchange profit and loss is excluded, net profit to mother is +22%/24%.

The annual revenue growth rate will largely depend on the implementation of equipment renewal policies, but under the low base for the same period last year, 2H24 revenue growth is expected to pick up somewhat. Affected by industry restructuring, the company's 1H24 equipment revenue fell 12% year on year. 2H24 equipment revenue will be greatly affected by the approval progress of equipment renewal projects and the availability of supporting funds. Since the approval process for equipment renewal projects is still slow, and considering that supporting funds will take additional time, we expect that equipment updates will drive the company's revenue in 2025 even more significantly, or the impact on the company's 2024 revenue may be limited. However, considering the low 2H23 revenue base, 2H24 revenue will still pick up somewhat from the year-on-year growth rate.

The majority shareholders promised not to reduce their holdings for the next six months and pay an interim dividend of 4.06 yuan/share. The company announced an interim dividend of RMB 4.06 per share, with a dividend rate of 65% (vs 2023 dividend rate: 61%). Based on the closing price on the day of the announcement, the dividend rate was 1.8%. The company indicated its intention to gradually increase the cash dividend ratio. Furthermore, all internal shareholding platforms, such as the company's controlling shareholders and employee platforms, promised not to reduce their holdings for 6 months from August 30.

Maintain the “buy” rating and adjust the target price to RMB 350. Considering that the 2H24 equipment update will gradually be implemented, compounded by the impact of the low base in the same period last year, the 2H24 growth rate is expected to pick up. We expect revenue growth of +17% in 2024. The target price was adjusted to RMB 350, corresponding to 25x 2025E PE, which is 0.8 standard deviation lower than the average PE in the past 3 years.

Investment risks: Procurement policy risks, new medical infrastructure slowdown, ongoing industry restructuring impact, geopolitical impact.