24H1's performance declined due to the isolation and protective equipment base, and 24Q2's performance showed an inflection point. In the first half of 2024, the company achieved revenue of 2.042 billion yuan (-11.44%), net profit due to mother 0.161 billion yuan (-32.13%), and net profit not attributable to mother of 0.162 billion yuan (-27.57%). Among them, 24Q2 single-quarter revenue was 1.079 billion yuan (+7.25%), net profit attributable to mother was 0.088 billion yuan (-3.51%), and net profit not attributable to mother was 0.087 billion yuan (+5.75%). The apparent performance of 2024H1 declined, mainly due to the high base of quarantine protective equipment in 23Q1. The 24Q2 performance inflection point was evident. The revenue side achieved month-on-month growth, and net profit to mother increased month-on-month, with a slight year-on-year decline. Mainly affected by government subsidies and exchange rate fluctuations, net profit not attributable to mother achieved a month-on-month increase.

Regular business is improving quarter by quarter, and overseas and domestic theatrical and retail businesses have all achieved positive growth. Excluding quarantine and protective equipment, 2024H1's regular business revenue was 1.953 billion yuan, up 7.53% year on year, and 24Q2 regular business revenue was 1.04 billion yuan, up 11.85% year on year, and 13.94% month-on-month increase over 24Q1. By business line, 24H1 overseas conventional business revenue was 1.139 billion yuan (+0.68%), domestic market hospital line regular business revenue was 0.502 billion yuan (+17.69%), and domestic retail line regular business revenue was 0.278 billion yuan (+26.82%). The regular business of all terminals achieved positive growth, and the domestic cinema line and retail line grew significantly.

The gross margin has been rising steadily, and the cost ratio has increased. The company's gross profit margin was 35.41% (+0.68pp) in the first half of 2024. The increase in gross margin was mainly due to an improvement in the revenue structure, with an increase in the share of modern wound dressing and surgical sensing control businesses with high gross margins; sales expenses ratio 8.75% (-0.63pp), management expenses ratio 12.87% (+1.85pp), R&D expenses rate 3.06% (-0.51pp), financial expenses ratio -0.53% (+0.53pp), four rates of 24.14% (+1.24pp). The cost ratio increased mainly due to the increase in revenue scale To you.

Investment advice: Considering the impact of domestic industry restructuring on new products entering the hospital and overseas inventory removal, the profit forecast is slightly lowered. Revenue is expected to be 4.5/5.27/6.17 billion yuan (originally 4.6/5.45/6.39 billion yuan) for 2024-2026, with a year-on-year growth rate of 9%/17%/17%, and net profit to mother of 0.4/0.52/0.65 billion yuan (originally 0.41/0.52/0.67 billion yuan), with a year-on-year growth rate of 104%/30%/24%, The current stock price corresponds to PE = 14/10/8x, maintaining the “better than the market” rating.

Risk warning: Consolidation of acquisition targets falls short of expectations; risk of price increases of raw materials; risk of exchange rate fluctuations.