Introduction to this report:

Steady growth under multiple pressures such as domestic collection and landing, mainframe and assembly line installations progressed smoothly, overseas markets continued to grow at a high rate, the share of medium and large machines increased, and the trend of increasing reagents was improving. Maintain an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. Considering the slowdown in domestic reagent sales under multiple pressures such as collection and landing, the 2024-2026 EPS forecast was lowered to 2.48/3.05/3.72 yuan (originally 2.69/3.49/4.45 yuan). Referring to comparable company valuations, the 2024 PE 34X was given, and the target price was raised to 84.32 yuan to maintain the increase rating.

The performance was in line with expectations. The company achieved operating income of 3.414 billion yuan (+17.41%) in Q1-3 in 2024, net profit of 1.384 billion yuan (+16.59%), after deducting non-net profit of 1.331 billion yuan (+20.80%), of which Q3 achieved operating income of 1.203 billion yuan (+15.38%), net profit of 0.48 billion yuan (+10.02%), net profit of 0.463 billion yuan (+11.62%). The performance was in line with expectations. Q3 profit fell short of revenue growth, mainly due to a slowdown in domestic reagent growth. The decline in the share of revenue from high-margin reagents led to a drop of 2.51 pct in gross margin to 71.85%, and net profit margin falling 1.95 pct to 39.93%.

The domestic market is growing steadily, and the installation of mainframes and assembly lines is progressing smoothly. Affected by industry restructuring, full implementation of DRG policies, medical insurance flight inspections, and procurement promotion, etc., the overall volume and price of the industry is under pressure, and the company still achieved steady growth as an industry leader. 2024Q1-3's main domestic business revenue was 2.196 billion yuan (+13.60%), of which reagent revenue increased 13% year over year. Q3 At the time of collection and implementation, domestic reagent sales faced short-term adjustments, and revenue growth was slower than in the first half of the year. The installation of chemiluminescence instruments progressed steadily. The Q1-3 domestic market completed the installation of 1,248 units, accounting for 75% of mainframes. Furthermore, the mainstream water line T8 has been promoted smoothly since it was launched in June. A total of 30 installations/sales have been completed, and the market reputation is good.

Overseas markets are growing rapidly, and the share of medium to large machines continues to rise. The company's overseas markets are gradually segmented, and a regionalized management model is implemented to comprehensively improve the quality of regional services. It also continues to increase localization in key countries to promote business growth in key overseas regions. 2024Q1-3's main overseas business revenue was 1.212 billion yuan (+25.16%), continuing the high growth trend, and the share of overseas business revenue increased to 36%. The trend of reagent intake is improving. Q1-3 reagent revenue increased 32% year over year, and led to an increase in overseas gross margin. Q1-3 Overseas markets sold a total of 3113 light-emitting instruments. The company focused on promoting and applying mainframe X6 and X8, and continued to expand large-scale terminals. The sales share of medium and large light-emitting instruments increased to 66%, laying a solid foundation for future overseas reagent sales growth.

Risk warning: New product launches and promotions fall short of expectations; risk of price reduction in product collection