Revenue was basically flat, and pressure on the profit side was under pressure. In the first half of 2024, the company achieved revenue of 0.338 billion yuan (+0.93%), net profit attributable to mother 0.057 billion yuan (-47.37%), and net profit not attributable to mother of 0.053 billion yuan (-43.62%). Among them, 24Q2 single-quarter revenue was 0.169 billion yuan (-11.92%), net profit due to mother 0.018 billion yuan (-74.84%), and net profit not attributable to mother was 0.017 billion yuan (-72.75%).

The company's revenue side remained flat in the first half of 2024, mainly due to industry restructuring and pressure on the profit side. The main reason was that the company continued to increase investment in R&D and strengthen marketing network layout and system construction, leading to an increase in R&D expenses and sales expenses, as well as a reduction in government subsidies.

The gross margin was basically flat, and the cost ratio increased significantly. 2024H1 gross profit margin was 68.22% (+0.61pp), and gross margin was basically the same. The sales expense ratio is 27.99% (+4.64pp), the management expense ratio is 7.10% (+2.11pp), the R&D expense ratio is 19.44% (+5.26pp), the financial cost ratio is -3.34% (+0.73pp), and the four rate is 51.19% (+12.74pp). The sales expense ratio and R&D expense ratio have increased significantly.

Research and development efforts have continued to be strengthened, and product development results have been fruitful. 2024H1 continues to increase product development efforts, investing 0.066 billion yuan (+38.37%) in R&D, accounting for 19.44% of revenue. 199 new patents were added, including 52 invention patents, 6 new medical device registration/filing certificates, and new products such as infrared thermal radiation therapy devices, ultrasonic conduction directed radiotherapy devices, and targeted drug penetration therapy devices were launched based on clinical needs. The company actively lays out the application of biometric feedback manipulation technology such as brain-computer interfaces in the medical field, and has jointly built a rehabilitation medical device research institute with Xi'an Jiaotong University to promote the deep integration of medical education, research and production. Continued investment in R&D is expected to enhance the company's core competitiveness in the field of rehabilitation devices.

Investment advice: Considering the impact of industry restructuring and the company's continued increase in R&D and sales investment, the profit forecast is estimated to be 0.82/1/1.17 billion yuan (originally 0.92/1.13/1.34 billion yuan) for 2024-2026, a year-on-year growth rate of 11%/21%/18%, net profit to mother 0.21/0.27/0.33 billion yuan (originally 0.28/0.34/0.41 billion yuan), the year-on-year growth rate is -9%/29%/26%, currently The stock price corresponds to PE = 18/14/11x, maintaining the “better than the market” rating.

Risk warning: Equipment procurement amounts and progress fall short of expectations; market competition increases risk; policy risk.