Matters:

The company released its 24-year report, with operating income of 0.354 billion yuan (+22.29%), net profit of 0.006 billion yuan (-85.13%) to mother, deducting non-net profit of -0.001 billion yuan. 24Q2, operating income of 0.184 billion yuan (+12.61%), net profit due to mother 0.003 billion yuan (-86.52%), after deducting non-net profit of -0.001 billion yuan.

Commentary:

By region, the overall domestic and foreign business achieved steady growth, and domestic business growth is expected to accelerate in the second half of the year.

24H1's domestic revenue was 0.286 billion yuan (+22.27%), and it still achieved steady growth under macro-environmental pressure. 24H1 increased its product promotion efforts in the domestic market, updated and upgraded the company's products based on clinical needs, broadened the coverage of hospitals at all levels. At the same time, the continuous rise in the company's brand influence also had a positive effect on business. With the gradual implementation of the equipment update policy in the second half of the year, endoscopes are expected to benefit as medical devices, and there is plenty of domestic replacement space for the company in the second half of the year. Domestic revenue is expected to return to high growth. 24H1's overseas revenue is 0.068 billion yuan (+22.40%), and its products have been further promoted. 24H1 has made many advances in market entry into the international market. In the European Union, Brazil, South Korea, Russia and many other countries or regions, the company's 4K endoscope product AQ-300 obtained CE certification from the EU in early 2024. The company's international business team is actively participating in various related industry conferences and industry exchanges. In the future, with the launch of the AQ-300 in the EU region, the company Overseas business revenue is expected to grow at an accelerated pace.

By business, endoscopy equipment is the main driving force for current performance, and there is huge room for development of consumables and services.

24H1's endoscopic equipment revenue was 0.342 billion yuan (+23.37%), accounting for 96.65%, endoscopic diagnostic and treatment consumables revenue of 0.007 billion yuan (-8.88%), accounting for 1.95%, endoscopy maintenance service revenue of 0.004 billion yuan (-2.73%), accounting for 1.19%, and rental revenue of 0.75 million yuan (+219.01%), accounting for 0.21%. We believe that the development of domestic soft mirror enterprises can be divided into three stages, from a single device revenue to an “equipment+service” model, and finally developed into a development model combining software and hardware, and equipment and consumables. Currently, Australian and Chinese endoscopy is in the first stage. With the continuous enrichment of the Australian and Chinese endoscopy business structure, there is huge room for future consumables and service business development.

Products are continuously updated and iterated to actively adapt to the diverse needs of the market. 24H1 invested 0.087 billion yuan in R&D, up 25.48% year on year, accounting for 24.70% of revenue. With continuous investment, 24H1's product pipeline has made many advances. In March 2024, the company successively launched electronic percutaneous cholangioscopy and electronic cystoscopy, moving from the fields of gastroenterology and respiratory medicine to the fields of hepatobiliary surgery and urology. Excellent lens parameters can ensure that the lens enters a finer natural cavity, providing more options for clinical examination and discovery. In May 2024, the company released an electronic ureteropyroscope. The ultra-fine outer diameter lens can enter the narrow ureter to help treat urinary stones. The company continues to promote product updates and iterations, and actively adapts to the diverse needs of the market.

Investment suggestions: Based on the company's 24H1 performance, considering share payment expenses and promotion and R&D expenses, we expect the company's net profit to be 0.045, 0.165, and 0.274 billion yuan respectively (the original forecast values for 24-26 were 0.13, 0.19, and 0.28 billion yuan), with year-on-year changes of -22.1%, 265.9%, and 66.3%, respectively. EPS was 0.34, 1.23, and 2.04 yuan, respectively. times. According to DCF model estimates, the company was given an overall valuation of 8 billion yuan, corresponding to a target price of about 59 yuan, maintaining a “recommended” rating.

Risk warning: 1. The progress of international business promotion falls short of expectations; 2. The progress of new product launches falls short of expectations.