Incident: On August 23, the company released its 2024 semi-annual report. In the first half of 2024, it achieved operating income of 1.001 billion yuan, an increase of 27.03% year on year; net profit to mother of 0.343 billion yuan, up 33.09% year on year; net profit after deducting 0.328 billion yuan, an increase of 35.20% year on year, mainly due to increased sales scale and cost reduction.

Among them, revenue for the second quarter of 2024 was 0.546 billion yuan, up 24.50% year on year; net profit to mother was 0.202 billion yuan, up 30.84% year on year; net profit after deducting non-return to mother was 0.191 billion yuan, up 25.51% year on year.

The volume of electrophysiology surgeries maintained strong growth, and the coverage of the vascular intervention market steadily increased the electrophysiology business: In the first half of 2024, the electrophysiology business achieved revenue of 0.223 billion yuan. In the first half of 2024, the company completed about 7,500 3D electrophysiology surgeries in more than 800 hospitals, an increase of more than 100% over the same period in 2023; domestic electrophysiology products were added to more than 150 hospitals, covering more than 1,250 hospitals. In the electrophysiological bandwidth procurement project led by Fujian Province and involving 27 provinces, the procurement plan was completed on schedule in categories such as fixed curved two poles, adjustable curved four poles, adjustable ten curved electrodes, and ring-lung electrodes.

Vascular intervention business: In the first half of 2024, the coronary pathway business achieved revenue of 0.503 billion yuan, and the peripheral intervention business achieved revenue of 0.175 billion yuan. In the first half of 2024, the coverage rate and inpatient penetration rate of the company's vascular intervention products further increased. The number of admissions for coronary products increased by nearly 20% compared to the same period last year, and admissions for peripheral products increased by more than 30%, covering nearly 4,000 hospitals as a whole.

International business continued to grow, with major overseas markets and product lines showing outstanding performance in the first half of 2024. Despite facing multiple challenges such as geopolitical changes, global economic fluctuations and exchange rate changes, the company's international business continued to grow. Overall, overseas revenue was 0.116 billion yuan, up 19.73% year on year. Among them, the CIS region had outstanding performance, up 124% year on year; Europe increased 51% year on year; Asia Pacific, Latin America, Middle East Africa and other regions showed significant year-on-year growth.

In terms of product lines, coronary and peripheral independent brands and independent electrophysiological brands continued to be the main driving force for the company's international business growth. The coronary and peripheral independent brand business increased 43.77% year on year in the first half of the year, and independent electrophysiological brands increased 63.04% year on year.

The research project made steady progress. A number of major products entered the registration review stage in the first half of 2024, and the company made continuous progress in the research project. Thoracic aortic laminating stent systems, guide wires, radial artery hemostatics, contrast catheters, medical negative pressure aspirators, disposable cardiac electrophysiological labeling catheters, coronary thrombus aspiration catheters, etc. have obtained registration certificates.

By the end of June 2024, products such as venous filters, spring rings, curved bidirectional adjustable guide sheath tubes, peripheral high pressure balloon dilatation catheters, disposable interventional surgical kits, ring handle syringes, pressure extension tubes, and connecting plates in the coronary and peripheral product line had entered the registration and repair stage, and carotid artery stents, TIPS laminating stents, and abdominal aortic stents had entered the clinical trial stage. Pulse ablation catheters, pulse ablation catheters, high-density calibration catheters, pressure radiofrequency measurement catheters, pressure-sensitive ablation catheters, magnetoelectric positioning pressure-sensing pulse ablation catheters, magnetoelectric positioning pressure-sensing radiofrequency ablation catheters, magnetoelectric positioning annular labeling catheters, magnetoelectric positioning adjustable bending electrode catheters, etc. have entered the registration review stage.

The expense ratio was well controlled during the period. Gross margin and net margin increased slightly in the first half of 2024. The company's comprehensive gross margin increased 1.01 pct year on year to 72.75%. The sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 17.70%, 4.62%, 13.38%, and -0.64%, respectively. The year-on-year changes were -1.43pct, +0.12pct, -0.45pct, and +0.02pct, respectively. Under the combined influence, the company's overall net interest rate increased by 1.71 pct year on year to 33.77%.

Among them, the comprehensive gross profit margin, sales expense ratio, management expense ratio, financial expense ratio, and overall net interest rate for the second quarter of 2024 were 73.36%, 16.37%, 4.04%, 12.51%, -0.72%, 36.69%, respectively, with changes of +0.77pct, -2.23pct, +0.02pct, -0.34pct, +0.69pct, and +1.59pct, respectively.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 2.223 billion/ 3.008 billion/ 3.968 billion yuan, with year-on-year growth rates of 35%/35%/32% respectively; net profit to mother is 0.697 billion/ 0.951 billion/ 1.272 billion yuan, respectively, up 31%/36%/34%, respectively; EPS is 7.16/9.77/13.07, respectively. The closing price on August 23, 2024 corresponds to 50 times PE in 2024. Maintain a “buy” rating.

Risk warning: New product development failure and registration risk, risk of loss of research and management talent, risk of market competition risk, risk of falling product prices due to industry policies, risk of sales channel risk and dealer management risk, product quality and potential liability risk, product registration risk.