Medical imaging equipment industry: high clinical value+policy support+low ownership of high-end equipment, the industry is still in a period of rapid growth

Market demand combined with policy dividends is two-wheel drive, and China's medical imaging equipment market continues to grow. According to Insight Consulting, it has reached 53.7 billion yuan in 2020 and is expected to reach 75.12 billion yuan in 2025, with a compound annual growth rate of 6.9%.

Domestic replacement: According to Frost & Sullivan research, most of the many cutting-edge technologies owned by medical imaging equipment made in China are growing and have great potential for development. Compared with developed countries such as the US, Japan, and South Korea, the per capita ownership of medical imaging equipment such as MR in China is at a low level, and there may be more room for application penetration in the future. In addition, among imaging equipment, the DR localization rate is 44%, CT, MR, PET-CT, etc. are all below 20%. The localization rate is low, so it is time to replace domestic production.

Policy support: The “Thousand Counties Project” county hospital comprehensive capacity improvement work plan helps upgrade primary medical equipment. The interest-rate loan policy is combined with the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which is expected to further promote the development of the medical imaging equipment industry.

Radiotherapy equipment industry: Technological breakthroughs have been achieved, and the domestic market size is rapidly expanding. China's per capita ownership of radiotherapy equipment is lower than WHO standards. Treatment demand is rigid, and there is still room for market expansion. From 2015 to 2019, China's radiotherapy equipment market grew from 2.82 billion yuan to 3.91 billion yuan, with a compound annual growth rate of 12.8%. It is estimated that China's radiotherapy equipment market will reach 6.33 billion yuan in 2030.

RT products have a high technical threshold. Currently, Varian and Mediceda, as leading companies in radiation therapy equipment, still occupy the main share of the RT market in China. According to statistics on the new domestic market value in 2023, the company ranks third in the RT product market share.

Company: A pioneer in domestic high-end medical imaging equipment. After ten years of development in the global market, Lianying Medical has become a pioneer in domestic medical imaging equipment. From catching up to surpassing, the company has continued to launch the first equipment in the industry/domestic market over the past ten years, and the product line has continued to enrich. The company's products cover various types of equipment such as MR, CT, MI, XR, RT, etc. The occupancy rate of the top three hospitals is increasing year by year, and MI equipment has entered high-grade hospitals in the United States, and clinical recognition is high. The company's development is steady. From 2018 to 2023, the company's revenue increased from 2.035 billion yuan to 11.411 billion yuan, with a compound annual growth rate of 41.17%; from 2020 to 2023, the company's net profit to mother increased from 0.903 billion yuan to 1.974 billion yuan, with a compound annual growth rate of 29.78%. With 2024H1, the company achieved operating income of 5.333 billion yuan, up 1.18% year on year; net profit to mother was 0.95 billion yuan, up 1.33% year on year.

The product line is rich and competitive: In the field of high-end medical imaging equipment and radiotherapy equipment, the coverage of the company's product line is basically the same as that of international manufacturers such as “GPS” 1. In recent years, the company's high-end products have gradually expanded, driving an increase in gross margin and net profit margin. 1) MR: The market recognition of ultra-high field 3.0T and 5.0T is gradually increasing, while configuration optimization stimulates the release of high-end demand; 2) CT: high-end 128 and ultra-high end (≥256 rows) are showing good momentum; 3) MI and RT: high equipment value and low per capita ownership rate, which is expected to benefit from large-scale equipment renewal policies.

The supply chain is autonomous and controllable: The company adheres to an independent production model, has a production capacity layout at home and abroad, and continues to attack core components and underlying technology internally to avoid the risk of being “stuck in the neck” of key components. At present, the company has self-developed or self-produced all MR core components (magnets, gradients, radiofrequency, and spectrometers), MI core materials and components (scintillation crystals, detectors), etc., and is advancing the R&D process of other core components. Only CT's high-end ball tubes and high-end high-pressure generators, XR's X-ray tubes, high-end high-pressure generators, and flat panel detectors, and RT magnetrons have yet to be self-produced.

Overseas business development is gradually improving: Overseas business is expanding in an orderly manner. Currently, the company's business has covered more than 70 countries and regions in Asia, America, Europe, Oceania, and Africa. MR, CT, XR, and MI products have all been exported. Overseas main business revenue has increased year by year from 98.8185 million yuan in 2019 to 1.659 billion yuan in 2023, with a compound growth rate of 102.42%, and the proportion has increased from 3.37% to 14.85%. The company will further adhere to the market strategy of “fight high and break through the whole line”, adhere to the “one core and multiple wings” global market strategy, and further achieve in-depth construction of overseas marketing systems and deep breakthroughs in the global market.

Investment advice

We expect the company's revenue from 2024 to 2026 to reach 13.359, 16.445, and 20.064 billion yuan, respectively, with year-on-year growth rates of 17.1%, 23.1%, and 22.0% respectively; net profit to mother will reach 2.238, 2.741, and 3.449 billion yuan respectively, with year-on-year growth rates of 13.3%, 22.5%, and 25.8% respectively. In view of the fact that the company is a leading domestic medical imaging equipment company, the product is highly competitive, has high R&D barriers, and is covered for the first time, giving it a “buy” rating.

Risk warning

Risks of centralized procurement policies;

Risks of business cooperation under the distribution model;

International operations and business development risks.