Key points of investment:

Incidents. The company released its 2024 three-quarter report. In the first three quarters, it achieved revenue of 1.398 billion yuan (yoy -4.74%, same below), net profit of 0.109 billion yuan (yoy -66.01%), net profit not attributable to mother 0.086 billion yuan (yoy -73.21%), of which revenue for the third quarter was 0.386 billion yuan (yoy -9.18%), net profit to mother -0.062 billion yuan, net profit not attributable to mother -0.069 billion yuan.

The core business is under pressure, and the implementation of equipment updates is expected to catalyze. In the first three quarters of 2024, domestic medical equipment tenders were clearly under pressure, disrupting the company's ultrasound and endoscopy business, which was the main factor in the decline in revenue. Following the announcement of the domestic equipment renewal policy in 24Q1, all provinces have actively reported. Currently, potential procurement demand for medical equipment is clearly picking up. Among them, imaging products have clearly benefited and are expected to gradually be implemented in 2025, driving procurement of products such as ultrasound and endoscopy.

Production line structure adjustments and gross margin adjustments have bucked the trend and expansion costs increased. In the first three quarters of 2024, the company's gross margin was 66.59%, up from 2023 (69.41%) and the first half of 2024 (67.43%). It is expected to be related to domestic policies affecting the admission of high-end products. Sales expenses were 0.459 billion yuan (yoy +30.06%) and R&D expenses were 0.338 billion yuan (yoy +28.33%) during the same period. The company bucked the trend and expanded, and the sales and R&D departments increased personnel recruitment, which was the main reason for the increase in expenses. The company continued to reduce operating risks, with accounts receivable of $0.161 billion, which is significantly lower than 24H1.

Profit forecast and rating: We expect the company's 2024-2026 revenue to be 2.068/2.526/3.031 billion yuan, respectively, with year-on-year growth rates of -2.46%/22.13%/19.99%, and net profit to mother of 0.203/0.542/0.667 billion yuan, respectively. The year-on-year growth rates are -55.44%/167.63%/23.07%, respectively. The PE corresponding to the current stock price is 76/28/23 times, respectively. Given the company's leading position in the imaging field, the endoscopy business grew rapidly and maintained a “buy” rating.

Risk warning. Industry competition increases risks, new product promotion falls short of expectations, domestic policy changes, and foreign trade conflicts.