Surgical power supplies have been growing steadily, and equipment products are under pressure. In the first half of 2024, the company achieved revenue of 0.151 billion yuan (+2.60%), net profit due to mother 0.059 billion yuan (+28.25%), after deducting non-return net profit of 0.042 billion yuan (-4.51%). Among them, 24Q2 single-quarter revenue was 0.077 billion yuan (-3.61%), net profit attributable to mother was 0.033 billion yuan (+50.24%), and net profit not attributable to mother was 0.022 billion yuan (+4.45%).

The company's 24H1/24Q2 revenue achieved single-digit growth/decline, respectively, and net profit to mother grew faster. It was mainly due to an increase in revenue generated from cash management of idle funds compared to the same period last year, and net profit not attributable to mother changed slightly. By product line, surgical power consumables achieved steady growth. 24H1 grew at a year-on-year rate of more than 20%. However, surgical power equipment and new product equipment were affected by factors such as delayed tenders and lower unit prices for surgical power device equipment due to external environmental influences, and revenue declined year-on-year.

The gross margin has increased, and the R&D cost ratio has increased significantly. The company's gross profit margin in the first half of 2024 was 70.72% (+1.53pp). The increase in gross margin was mainly due to an increase in the revenue share of surgical power consumables. The sales expense ratio is 24.70% (+0.30pp), the management expense ratio is 7.05% (-0.78pp), the R&D expense ratio is 15.20% (+4.17pp), the financial cost ratio is -4.57% (-2.97pp), and the four rate is 42.38% (+0.72pp). The company continues to increase R&D efforts, and the R&D cost rate has increased significantly.

Increase investment in R&D and enhance core competitiveness. The company always adheres to the development strategy of independent R&D and innovation, and attaches importance to R&D system construction. The total R&D investment in the first half of the year was 23.0118 million yuan, accounting for 15.20% of revenue, an increase of 41.36% over the same period last year. According to the iterative planning of various product technologies, the company focused on key projects, invested R&D resources in the endoscopic system and energy surgery equipment sector to accelerate the certification and listing of new products. 24H1 obtained 2 three types of medical device product registration certificates, including the product registration certificate for ultrasound soft tissue surgery equipment. In addition, the company has further expanded its endoscope product line, increased the research and development of soft endoscopes, and helped the company provide more comprehensive endoscopy solutions.

Investment advice: Considering the impact of industry restructuring and lowering the profit forecast, the expected 2024-2026 revenue is 0.39/0.47/0.55 billion yuan (previously 0.47/0.61/0.77 billion yuan), year-on-year growth rate of 7%/21%/19%, net profit to mother 0.13/0.15/0.18 billion yuan (originally 0.15/0.24 billion yuan), year-on-year growth rate of 10%/20%/19%, corresponding to current stock price PE = 22/18/ 16x, maintaining the “better than the market” rating.

Risk warning: risk of R&D failure; increased risk of competition; risk of falling prices due to collection.