Incident: The company announced its 2024 semi-annual results. 2024H1 achieved revenue of 213.7 million yuan (+32.5%, year-on-year growth rate in parentheses, same below), net profit of 7.7 million yuan (+125.9%) to mother, net profit of 12.6 million yuan (+64.0%) after deducting net profit from non-mother. 2024Q2 achieved revenue of 122.6 million yuan (+39.2%), net profit to mother of 5.2 million yuan (+138.5%), and net profit of 5.2 million yuan (+135.4%) after deducting non-return net profit in a single quarter.

Profit turned loss into profit: The company showed a continued positive level of profit. 2024H1, in terms of cost control, operating costs and sales expenses increased year-on-year with main revenue, but the increase was less than the increase in revenue; management expenses fell 15% year over year, mainly due to the subsidiary Sano Shinshang not included in management expenses; R&D expenses increased 30% year over year, mainly due to the merger of US eLum and payment of some R&D projects entering key milestones.

The neurologic sector is growing steadily, and I am optimistic that the self-inflating stent has the potential to become a billion-level single product. It is expected to be approved this year: the 2024H1 neurointerventional segment has revenue of 90.7 million yuan (+2.74%), mainly intracranial stents and an increase in sales volume of 9 new neurosurgical products, and the combined effects of declining unit prices and sales of neurointerventional balloon products. In terms of key products, the ① intracranial self-inflating stent was approved as an innovative device, and registration acceptance was completed in May 2024. We anticipate that it will be approved for marketing by the end of 2024.

This product is the world's first intracranial self-inflating drug stent. It targets a large base of ICAS (intracranial atherosclerotic stenosis) patients. There are 150W new patients every year, but there are currently few ICAS approved products. The company's products are more convenient and easy to operate, and have the advantage of drug coating. The small sample data revealed in October 2023 had a narrowing rate of 0 (35 patients, 6 months follow-up), and the operating power of the surgical instruments was 100%, which is far superior to similar products. ② The clinical trial of coated dense mesh stents has completed all clinical follow-up, and the results have met expectations. The company plans to submit a registration application in 2024H2. This product is currently the only coated dense mesh stent in China. It has special specifications that are compatible with 0.017in microcatheters, and can treat aneurysms in small and medium blood vessels in the distal end of the brain.

After winning the bid for coronary stent+spiny balloon coronary artery collection, the volume was rapid, and overseas markets opened up room for growth:

The 2024H1 coronary intervention segment's revenue was 122.5 million yuan (+70.8%). The increase was mainly due to the company's two coronary stents HT Supreme and HT Infinity and spiny balloons being selected for national collection and renewal (23-25 years). Shipments in 2023 also increased by +437%, far exceeding the 4.8w contract volume. This year is the second year of implementation of the collection, and sales of coronary and balloon products have maintained a significant increase in sales.

At the same time, overseas performance is expected to increase. HT Supreme has successfully entered French health insurance, and the results of large-scale overseas multi-center clinical trials of this stent are relatively good. It is currently the only coronary stent in China that has entered the FDA's substantive review stage, and overseas is expected to further open up room for growth in the future.

Profit forecast and investment rating: We maintain our previous expectations. We forecast the company's revenue for 2024-2026 to be 493, 811, and 1,156 million yuan, respectively, and net profit to mother of 16, 91, and 219 million yuan, respectively. Considering the company's high R&D platform barriers, the high future potential of innovative single products, and the increase in shipments of collected products, which has led to a significant improvement in profits, we maintain a “buy” rating.

Risk warning: the risk of price reduction in collection, product approval time is lower than expected, etc.