Incident: Recently, the company released its report for the third quarter of 2024: revenue of 0.318 billion yuan was achieved in the first three quarters of 2024, an increase of 30.20% over the previous year, mainly due to a sharp increase in sales of coronary products. Net profit to mother - -0.007 billion yuan, up 83.84% year on year. We believe the main influencing factors are:

(1) Economies of scale brought about by a sharp increase in operating income; (2) Significant reduction in management expenses; (3) When eLum's controlling interest was obtained, 18.18% of the shares held by the original holding subsidiary were adjusted according to fair value, and the premium amount was included in investment income, resulting in a significant increase in investment income. Net profit after deducting non-return to mother - -0.029 billion yuan, a year-on-year increase of 41.65%.

Among them, revenue for the third quarter of 2024 was 0.105 billion yuan, up 25.76% year on year; net profit to mother was -0.014 billion yuan, down 18.72% year on year; net profit after deducting non-return to mother was -0.016 billion yuan, down 14.05% year on year.

Coronary Coronary products continue to participate in the collection, and the sharp increase in sales volume drives performance growth

In the first three quarters of 2024, the company's coronary business grew dramatically, mainly due to the implementation of the national second-round centralized procurement policy for coronary stent volumes. Sales of the company's two coronary stent products and sales of coronary balloon products that have entered the scope of collection increased dramatically. By the end of the first half of 2024, the company's sales volume of coronary stent products had exceeded the volume collected in 2024, a significant increase over the same period in 2023. At the same time, the company continues to optimize the process, further increasing the gross margin of coronary products.

Furthermore, in the Beijing-Tianjin-Hebei 28 consumables collection that began in December 2023, the company won the bid for the coronary artery spinous balloon dilatation catheter and catheter guide tube in this collection, which greatly promoted the in-hospital sales of the company's new coronary artery spinous balloon dilatation catheter. By the end of the third quarter of 2024, this collection has gradually begun to be implemented in various provinces and cities. With the implementation of procurement in more provinces and cities, the company's sales volume of coronary products is expected to increase further.

Follow-up results of novel drug-eluting stents verify product advantages, and overseas registration is expected to accelerate

On October 28, 2024, the five-year follow-up results of the PIONEER-III clinical trial study conducted by the company's novel drug-eluting stent system HT Supreme in the US, Japan, and Europe were announced.

The results showed that the test group of the company's HT Supreme stents showed clear numerical advantages compared to the control group (Xience series and Promus series stents), further verifying the company's significant advantages in many key aspects such as clinical safety and efficacy. At the same time, it also provides highly authoritative and persuasive evidentiary support for the approval of registration applications for this product in overseas countries such as the US and Japan.

The level of gross profit continues to rise, and cost-side improvements help increase net profit margins

In the first three quarters of 2024, the company's comprehensive gross margin increased 2.64pct to 61.29% year-on-year, thanks to the economies of scale brought about by the sharp increase in operating income. The sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 17.28%, 20.62%, 33.41%, and 0.98%, respectively. The year-on-year changes were -1.80pct, -8.21pct, +0.50pct, and +0.46pct, respectively. Among them, the management expense ratio dropped significantly, mainly due to the combined effects of factors such as amortization of intangible assets and reduction in share payment costs since the date of commencement of production and operation, when the subsidiary Sano Shenchang was officially put into operation. Under the combined influence, the company's overall net interest rate increased 16.57pct year-on-year to -1.68%.

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 65.57%, 17.21%, 22.18%, 36.40%, 0.95%, and -14.43%, respectively, with changes of +5.15pct, -0.98pct, -2.19pct, +2.70pct, +0.23pct, and +0.50pct, respectively. Among them, the R&D cost rate increased significantly, mainly due to the impact of some R&D projects entering key milestones and the increase in clinical trial costs.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 0.47 billion/0.699 billion/1.035 billion yuan, respectively, with year-on-year growth rates of 37%/49%/48%; net profit to mother is 0.002 billion/0.02 billion/ 0.05 billion yuan, respectively; increase 106%/742%/146%, respectively; EPS is 0.01/0.05/0.12, respectively, according to The closing price on November 8, 2024 corresponds to 10x PS in 2024.

Maintain a “buy” rating.

Risk warning: risk of failure or delay in registration of new products, risk of loss of technological talent, risk caused by collection policies, risk of market competition, risk of uncertainty in the launch of new products, risk of supply of important raw materials.