Incident: On October 29, 2024, Mindray Healthcare announced the 2024 three-quarter results report. In the first three quarters, the company achieved operating income of 29.485 billion yuan, up 7.99% year on year, net profit to mother of 10.637 billion yuan, up 8.16% year on year; after deducting non-net profit of 10.437 billion yuan, up 7.75% year on year. Looking at a single quarter, the company achieved revenue of 8.954 billion yuan in Q3, up 1.43% year on year; net profit to mother was 3.076 billion yuan, down 9.31% year on year; after deducting non-net profit of 3.057 billion yuan, a year-on-year decrease of 8.62%.

Looking at the subregions, the international market continues to gain strength, and the domestic short-term demand side is relatively weak. Benefiting from the continuous breakthroughs of high-end overseas strategic customers and medium and large sample volume laboratories, as well as the volume of seed businesses such as veterinary medicine, minimally invasive surgery, and AED, the international market grew by more than 18% in the first three quarters, with the European and Asia-Pacific markets growing by more than 30%. Domestic hospital procurement was delayed due to multiple factors such as medical sector rectification and medical equipment renewal projects. At the same time, hospital construction capital was tight and demand for non-rigid medical care was sluggish, and the domestic market grew less than 2% in the first three quarters.

Looking at production lines, the domestic market share of 24Q3's three major businesses has been steadily increasing. 1) The in vitro diagnostic production line grew by more than 20% in the first three quarters, benefiting from the acceleration of overseas localization production and breakthroughs in medium and large sample volume laboratories. The market share of domestic chemiluminescence, biochemistry, coagulation and other businesses increased steadily. Among them, chemiluminescence is expected to surpass one imported brand in China and become third in the market; 2) The medical imaging production line grew by more than 10% in the first three quarters, mainly benefiting from the volume of ultra-high-end ultrasound ResonA20 for full-body applications, which was launched at the end of last year, but domestic ultrasound terminal procurement is still sluggish The overall domestic market size declined; 3) Life Information and Support production lines declined by more than 10% in the first three quarters, benefiting from continued breakthroughs from high-end overseas strategic customers. International life information and support production lines grew by more than 10%, but due to delays in tenders and procurement, the domestic life information and support production line fell by more than 20%, and the overall domestic market size declined even more drastically.

Products are constantly being enriched, innovated and iterated, and breakthroughs are continuously achieved, especially in the high-end field. The company continues to guarantee high R&D investment. The R&D investment amount for the first three quarters of 2024 was 2.843 billion yuan, accounting for 9.64% of revenue. In the field of in vitro diagnosis, the company has launched 10 new biochemical analysis concentration reagents such as 10 chemiluminescence immunoassay reagents, and new products such as the M980 fully automatic biochemical immunity assembly line. In the field of medical imaging, the company launched new products such as the MX7 Advanced Obstetrics and Gynecology Edition. In the field of life information and support, the company launched new products such as the UX7 series 4K 3D fluorescence endoscope camera system.

Investment advice: Based on demand side recovery driven by improved domestic policy expectations, recovery in tendering, and acceleration of overseas expansion, we expect the company's revenue to be 39.7/46.732/55.155 billion yuan in 2024-2026, up 13.6%/17.7%/18.0% year on year, and net profit to mother of 13.435/15.641/18.317 billion yuan respectively, corresponding PE is 24/21/18 times, maintaining the “recommended” rating.

Risk warning: risk of changes in industry policy; risk of product development; risk of increased industry competition/decline in product prices; risk of trade policy exceeding expectations; risk of dealer sales models; risk of exchange rate fluctuations.