The company's 9M24 revenue/net profit to mother/ net profit after deducting non-attributable net profit was 2.012/0.451/0.446 billion yuan, respectively, +15.3%/+16.7%/+18.1% YoY; 3Q24 revenue/net profit attributable to mother/ net profit after deduction of 0.679/0.141/0.14 billion yuan, +13.4%/+15.1%/+17.8% YoY. We believe that the optimization of the company's product structure and improvement in profitability will drive profit growth faster than revenue growth. We are optimistic about the subsequent rapid growth in overseas revenue and maintain the purchase rating.

3Q24 The external environment may affect domestic revenue growth, and overseas revenue is growing rapidly 1) Domestic: We estimate that domestic revenue will slow year-on-year growth due to the impact of DRGs and volume procurement implementation in Hebei and other regions, and we are optimistic that subsequent policies will affect the recovery of growth after digestion; 2) Overseas: The company continues to strengthen localization in various overseas regions, channel coverage continues to expand, and disposable internal medicine cholangioscopy is being promoted smoothly in international markets such as Europe, America, and Japan. We are optimistic that overseas revenue will continue to grow rapidly.

The overall cost ratio of the 3Q24 company was basically stable year-on-year. The gross margin increased 9M24 sales/management/R&D/finance expenses to 23.11%/12.38%/5.54%/-1.63%, respectively, +1.19/-0.33/+1.99pct; 3Q24 sales/management/R&D/finance expense ratios were 23.86%/12.28%/6.19%/-1.33%, respectively, +2.17/-0.09/+0.52/-2.91 pct.

9M24/3Q24 gross margins were 67.64%/67.06%, respectively, +3.60/+2.44pct. The optimization of the company's product structure drove continuous improvement in profitability, and gross margin increased year-on-year.

Leading domestic endoscopic diagnostic and treatment consumables, maintaining a “buy” rating

We lowered some of our business revenue expectations and adjusted our expense ratio estimates. We forecast that the net profit due to mother for 24-26 was 0.564/0.687/0.801 billion yuan (previous value 0.597/0.746/0.937 billion yuan), +16.7% YoY, +16.7%, corresponding to EPS 3.00/3.66/4.27 yuan. Considering the continuous improvement of the company's profitability, we gave the company a 25-year PE valuation of 26x (comparable to the company's 25-year average expectation of 25x), corresponding to a target price of 95.05 yuan (previous value of 82.58 yuan).

Risk warning: The amount of collected products is less than expected; terminal demand is slowing down; new product release falls short of expectations.