Incident: On July 25, 2024, Shanghai Lianying Medical Technology Co., Ltd. plans to invest in Sichuan Jiuyiyuan Particle Technology Co., Ltd. with its own capital, with a transaction amount of 0.12 billion yuan. Lianying Medical obtained 10% of Jiuyiyuan's shares, and the pre-investment valuation is 1 billion yuan. Lianying Healthcare has the right to appoint 1 director to the board of directors. This investment is expected to promote Lianying Healthcare's overall competitiveness in the field of molecular imaging.

Companies with scarce particle accelerators enable nuclear medicine diagnosis and treatment. Jiuyiyuan is a domestic cyclotron manufacturer. Its products cover different energy levels such as 7 MeV, 11 MeV, and 20 MeV. It is mainly used to prepare positron radiation isotopes for PET equipment, and is one of the important devices for nuclear medicine diagnosis and treatment. The launch of Jiuyiyuan products, breaking the medical cyclotron market dominated by imported brands, is of great significance for the promotion of PET products in the diagnosis and treatment of tumors, coronary heart disease, and neuropsychiatric diseases. In 2023 and the first half of 2024, Jiuyiyuan's revenue was 46.8337 million yuan and 476,600 yuan (unaudited), and net profit for the same period was -9.955 million yuan and -13.962 million yuan (unaudited), respectively.

The adjustment of the configuration certificate is expected to drive up demand. In March 2023, the National Health Commission issued a notice on the large-scale medical equipment configuration license management catalogue (2023), promoting the change of some equipment from Class A management catalogue to Class B, or moving out of the catalogue from Class B. Among them, positron emission magnetic resonance imaging systems (PET/MR) were adjusted from Class A to Class B, and conventional radiotherapy equipment (including medical linear accelerators, spiral tomography systems, and gamma-ray stereotactic radiotherapy systems) was uniformly included in Class B management. Molecular imaging and radiotherapy product configuration certificates are expected to be downgraded to the degree of popularity of various types of medical institutions Upgrading, the industry as a whole may usher in expansion.

The product matrix continues to be rich, and the comprehensive competitiveness of molecular imaging is improving. Lianying Medical is one of the few domestic companies that have obtained PET/CT registration and achieved mass production of complete machines. It has mastered many core technologies in scintillators, detectors, etc., and continues to polish products around clinical diagnosis and treatment of tumors, nerves, and heart-related diseases. It has successively launched various leading products in the industry, such as TOF PET/CT product UMi780, integrated PET/MR product UPMR 790, etc. The company's molecular imaging equipment revenue (MI) in 2023 was 1.552 billion yuan, an increase of 1.35% over the previous year, accounting for about 13.60% . By investing in Jiuyiyuan, the company's molecular imaging product matrix has been further enriched to achieve a closed loop of nuclear medicine diagnosis and treatment.

Profit forecasting and valuation. We expect the company's total revenue for 2024-2026 to be 13.824/16.798/20.6 billion yuan, with growth rates of 21.15%/21.51%/22.63%, respectively; net profit to mother for 2024-2026 will be 2.381/2.883/3.523 billion yuan, respectively, with growth rates of 20.62%/21.08%/22.18%, respectively. The PE corresponding to the current stock price is 40x, 33x, and 27x, respectively. Australian and Chinese Endoscopy and Mindray Healthcare were selected as comparable companies. The average PE of the comparable company in 2024 was 38 times. Based on the company's continuous diversification of imaging equipment and the continuous improvement in the global competitiveness of high-end products, coverage for the first time, it was given a “buy” rating.

Risk warning. M&A integration falls short of expectations, overseas geopolitical risks, domestic policy risks, and new product promotion falls short of expectations.