Revenue and profit continued to grow rapidly in the first half of 2024, and revenue accelerated month-on-month in the second quarter. In the first half of 2024, the company achieved revenue of 2.211 billion (+18.54%), net profit attributable to mother 0.903 billion (+20.42%), and net profit of 0.868 billion yuan (+26.36%) after deducting non-attributable net profit. The second quarter achieved revenue of 1.19 billion yuan (+20.23%), net profit due to mother 0.477 billion (+20.76%), and net profit of non-return to mother 0.468 billion (+27.11%), maintaining rapid growth.

Domestic and foreign installations are in line with expectations, and the installed structure continues to be optimized. Domestic revenue in the first half of 2024 was 1.41 billion (+16.30%), of which reagent revenue increased 18.54% year on year; in the first half of the year, there were 796 domestic installed machines, of which 75.13%; the company effectively expanded large domestic medical terminal customers through X8, X6 and assembly line products, and the proportion of large-scale installed machines in the domestic market continued to increase, driving a steady increase in conventional reagent sales. Overseas revenue in the first half of the year was 0.796 billion (+22.79%), of which reagent revenue increased 29.11%; in the first half of the year, 2,281 luminaires were sold, with medium and large machines accounting for 64.80% (+10.07pp); the company segmented overseas markets and implemented a regionalized management model. Each region adopted a four-in-one management model of marketing, after-sales, market and business to strengthen the linkage between product sales and after-sales personnel, and comprehensively improve regional service quality. The company has established wholly-owned subsidiaries in 10 key overseas countries, and installed capacity in overseas markets At the same time as steady growth, the installed structure continues to be optimized, laying a solid foundation for the growth of overseas reagent sales. As of the first half of 2024, the total number of X8 units sold and installed at home and abroad reached 3,170 units.

There was a slight increase in gross margin, and various expense ratios were stable. In the first half of 2024, the company's gross margin was 72.78% (+1.29pp). The gross margin of instruments benefited from the increase in the sales share of X series and medium and large light-emitting instruments to 32.11% (+2.46pp). Among them, the gross margin of overseas instruments increased to 39.95% (+6.31pp); the reagent gross margin was 88.50% (-0.41pp), and the gross margin of domestic and foreign reagents remained stable. Sales expense ratio 15.11% (-2.38pp), R&D expense ratio 9.24% (+0.02pp), management expense ratio 2.60% (-0.39pp); financial expense ratio -0.57% (+1.12pp), mainly changes in exchange profit and loss; net sales margin 40.85% (+0.64pp), and profitability remains strong.

Investment suggestions: Equipment installation progressed steadily in the first half of 2024, and the installed structure continued to be optimized. Domestic and overseas reagents both showed a good growth trend in the second quarter. The self-developed T8 assembly line market is expected to drive the company to break through more large-scale medical terminals. The company's instrument platform has been further expanded and upgraded to the next generation of high-speed chemiluminescence and biochemistry instruments, and the forward-looking layout of the molecular and coagulation business will continue to highlight the company's platform-based advantages. Maintaining the profit forecast, net profit for 2024-26 is expected to be 2.065/2.608/3.228 billion, up 24.9%/26.3%/23.8% year on year. The PE corresponding to the current stock price is 26/20/16X, maintaining the “better than the market” rating.

Risk warning: risk of price reduction in collection; risk of increased industry competition; risk of overseas expansion falling short of expectations; geopolitical risk; risk of falling short of expectations in new business areas.