Beautiful Medical is the leading device component platform and continues to expand its business line. Beautiful Medical was founded in 2010. After more than 10 years of focus, it has the ability to provide full-process services for medical device components and product development. Currently, the cornerstone business is household ventilator components and artificial cochlear implant components. As a platform enterprise, the company has outstanding business development capabilities and has expanded to other medical device product components and household and consumer electronics components.

The impact of household ventilator customers removing inventory has basically been eliminated, and business growth can be expected from month to month. Customer A is a leader in the global household ventilator market. The company is a participant in the development of core components of its products and a core supplier for mass production. We have cooperated for more than ten years and have a stable relationship. In the long run, as the number of people with OSA/COPD increases, demand for household ventilators increases, and since 2021, global leading company Philips has been mired in a recall wave and announced its withdrawal from the US ventilator market in 2024. Customer A's market share is expected to continue to increase. In the short term, the company's performance was under pressure in the second half of 2023 due to customer A's inventory removal. By 24Q2, the impact of inventory removal had basically been cleared. Subsequent orders are expected to stabilize, and business growth can be expected from month to month.

Cochlear implant technology barriers are high, and business growth is steady. Customer B is the absolute leader in the global market for cochlear implants. The company mainly provides external sound processors, which are later extended to implant components.

Cochlear implants have high technical barriers, including biocompatibility, miniaturization, signal processing technology, etc. The company has a number of self-developed technologies around cochlear implants. Through in-depth cooperation with customer B, its share in the accessible market is expected to increase in the future. Apart from 2020, the growth rate of this business is over 10%, and it is expected to continue to grow steadily in the future.

New customers continue to break through, and platformization can be expected to be extended. The company's core competitive advantage comes from the technical level, including R&D advantages, precision mold design and manufacturing advantages, etc. Among them, plastic mold development and liquid silicone molding technology are the company's core technologies. The company continues to expand platform-based based on core technology, mainly in the two directions of household consumer electronics components and other medical components.

Household and consumer electronics components: 2024H1 revenue of 0.08 billion yuan (+36.6%). The company provides development and manufacturing services for high-end products and precision components for many well-known brands in the fields of health protection, personal care, outdoor sports, household and consumer electronics, including well-known international and domestic companies and brands such as Philips, YETI, Rosti, and SKG.

Other medical product components: 2024H1 earned 0.05 billion yuan (+14.9%). The company gradually broke through in segments such as blood sugar management, in vitro diagnosis, administration, intervention, hearing aid, monitoring, etc., and expanded more than 10 of the world's top 100 medical device companies, including Johnson & Johnson, Siemens, Abbott, Resonta Hearing, and Mindray. Currently, several projects and products are at various stages of development cooperation, and volume can be expected.

Profit forecast and valuation: Profit forecast slightly lowered. The company's 2024-26 revenue is estimated to be 1.61/1.98/2.45 billion yuan (originally 1.67/2.08/2.56 billion yuan), with a year-on-year growth rate of 20%/23%/24%, and net profit of 0.38/0.46/0.57 billion yuan (originally 0.39/0.49/0.6 billion yuan), with a year-on-year growth rate of 20%/23%. The current stock price corresponds to 34/28/23 times PE. Based on absolute valuation and relative valuation, the reasonable price range is 34.15-39.84 yuan, and the corresponding market value range is 13.9-16.2 billion yuan. There is 9-27% premium space compared to the current stock price, maintaining a “superior to the market” rating.

Risk warning: risk of major customer dependency; risk of exchange rate fluctuations; risk of new business development falling short of expectations; geopolitical risk.