Incident: On October 25, the company released its report for the third quarter of 2024: the first three quarters of 2024 achieved operating income of 1.382 billion yuan, a year-on-year decrease of 9.29%; net profit to mother was 0.172 billion yuan, a year-on-year decrease of 27.42%; net profit after deducting non-return to mother was 0.158 billion yuan, a year-on-year decrease of 26.93%. The slowdown in performance growth was affected by the high performance base for the first quarter of 2023 and the domestic macro environment in 2024.

Among them, revenue for the third quarter of 2024 was 0.46 billion yuan, up 6.07% year on year; net profit to mother was 0.047 billion yuan, up 57.15% year on year; net profit after deducting non-return to mother was 0.044 billion yuan, up 77.83% year on year.

The i500 promotion progress is in line with expectations. It is expected to consolidate the company's leading position in the blood gas field. On May 30, 2024, the company officially released the i500 fully automatic blood gas electrolyte analyzer in China. The new generation i500 fully automatic blood gas analyzer targets the high-throughput analysis needs of large clinical samples, takes into account high efficiency, high accuracy and high portability, and can meet the clinical needs of different departments such as laboratory departments, emergency departments, ICU, NICU, neonatology, obstetrics and gynecology, operating rooms, and anesthesiology.

According to data reported by the China Research Institute of Pratt & C Industry Research, as of the end of 2023, about 80% of the domestic blood gas analysis market was still occupied by imported brands. The launch of the i500 marks the improvement of the company's high-performance dry+wet blood gas analyzer product matrix layout, which is conducive to enhancing the market competitiveness of domestic equipment and further accelerating the localization of blood gas analysis and market share growth. The company is carrying out sales promotion work and beta testing of the i500 nationwide, and related developments are in line with the company's expectations.

Various intelligent products have been introduced one after another. The company actively promoted the digital intelligence layout in the first three quarters of 2024, and the company continues to work to deeply integrate information technology with the healthcare field. In August 2024, the company's full range of digital intelligence solutions was unveiled at the China International Medical Equipment Exhibition and Technical Exchange Conference. Under the national policy support of the “Healthy China 2030” Plan Outline, smart medical platform construction is developing rapidly. China's smart medical construction has achieved remarkable results, and the role of information technology in modern hospital construction and management will be further played. The company continues to explore in the field of information technology to form a “Internet of Things - Interconnection - Interconnection - Sharing” information technology product strategic layout. The company's smart health business product ecosystem uses data to drive business transformation, uses hardware product interconnection as a base, and informatization to empower traditional medical technology departments and clinical specialists scenarios, which is expected to strongly support the company's five major business segments.

The company's gross margin is stabilizing, and R&D investment is high

In the first three quarters of 2024, the company's comprehensive gross margin increased 0.33pct year-on-year to 58.17%. The sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 23.41%, 6.19%, 17.57%, and -0.62%, respectively. The year-on-year changes were +0.06ct, +0.67pct, +1.80pct, and +0.12pct, respectively. Among them, the R&D expense ratio changed significantly, which meant that the company maintained R&D investment even when revenue growth slowed. Under the combined influence, the company's overall net interest rate decreased by 3.19 pct year on year to 12.52%.

Among them, the comprehensive gross profit margin, sales expense ratio, management expense ratio, financial expense ratio, and overall net interest rate for the third quarter of 2024 were 57.00%, 22.92%, 5.97%, 17.53%, 0.33%, and 10.14%, respectively, with changes of -0.29pct, -3.22pct, -1.45pct, -1.79pct, +0.18pct, and +3.59pct, respectively. The sales expense ratio changes greatly, and we expect it to be a fluctuation in the pace of expenditure investment.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 1.882 billion/ 2.109 billion/ 2.349 billion yuan, with year-on-year growth rates of -3%/12%/11%; net profit to mother of 0.224 billion/ 0.266 billion/ 0.326 billion yuan, respectively; growth of 1%/19%/22%, respectively; EPS of 0.39 /0.46 /0.56, respectively. The closing price on November 4, 2024 corresponds to 27 times PE in 2024.

Maintain a “buy” rating.

Risk warning: The implementation of the equipment renewal policy falls short of the expected risk, the expansion of export sales of monitoring and in vitro diagnosis falls short of the expected risk, the effect of new product promotion falls short of the expected risk, and the repayment of accounts receivable falls short of the expected risk.