Investment highlights

Performance:

2024Q1-3, revenue of 1.36 billion yuan, YOY -2.91%, net profit attributable to the parent company of 390 million yuan, YOY -9.9%. net profit after deducting non-attributable to the parent company was 390 million yuan, YOY -21.6%.

In 2024Q3, the revenue was 330 million yuan, YOY -24.9%, and the net profit attributable to the parent company was 83 million yuan, YOY -23.6%. net profit of non-attributable to the parent company was 50 million yuan, YOY -65.5%.

Growth:

2024Q3 The company's 2024Q3 performance is still slightly under pressure due to factors such as the slowdown in bidding and the fluctuation of new energy testing demand. From the perspective of the company's construction projects and production line layout rhythm, we believe that the company is currently in the critical window period of strategic upgrading, in the short term, the depreciation and amortization of fixed assets after the consolidation of construction projects or a certain pressure on the profit side, but in the medium and long term, the company is involved in the field of rapid growth, in the expansion of new products and new customers is also advancing in an orderly manner, helping the company to quickly move from a flat panel detector supplier to an overall image solution provider, with strong medium and long-term investment value.

New products and new customers continue to expand: According to the company's 2024H1 interim report, (1) the company's active exploration of upstream components and raw materials for detectors such as collimators (ASGs), scintillators, and photodiodes (PD) continues.

At present, the company has completed the research and development of some two-dimensional collimators for medical CT and the introduction of domestic customers, entered the stage of mass production and sales, and actively developed two-dimensional collimators for security CT at the same time, and has promoted a number of security CT customers to achieve mass production. At the same time, ASGs for next-generation photon-counting CT are also being actively developed, and great progress has been made. Scintillation crystals cesium iodide and cadmium tungstate have been developed and mass-produced and sold, GOS scintillation ceramics have completed the development of industrial and security applications and entered the mass production stage, and GOS scintillators for medical CT detectors have made breakthroughs in research and development, and the key indicators have reached the international leading level, achieving small batch production. The company has also made good progress in the research and development of carbon plate composite material molding, which can further optimize the image performance, and has begun to be applied to some of the company's detector products.

(2) In the field of high-voltage generators and combined radiation sources, the company has carried out product planning and achieved certain results in the fields of C-arm, DR, medical spiral CT, dental CBCT, bone age and bone density examination, medical mammography diagnosis, portable multi-purpose X-ray examination, veterinary X-ray imaging equipment, industrial electronic testing, food safety testing and other fields, and will further extend to more subdivided applications such as high-end high-power anode grounding CT high-voltage generators, industrial and security inspections.

(3) In the field of tubes, in 2024H1, the company has completed the research and development of microfocus tubes, transmission target tubes, dental tubes and C-arm/DR tubes, of which microfocus tubes have been mass-produced. For CT tubes, the company has solved technical difficulties such as product simulation design, liquid metal bearing design and manufacturing, and material laser texture etching, and the product is still under further development.

On the whole, after years of planning and layout, the company has also completed the basic layout in the field of new core components such as high-voltage generators, ray sources, and ball tubes, and has achieved good results, with 90kV, 110kV, 130kV, 150kV and 180kV microfocus ray sources entering mass production and sales, and completing the research and development of 225kV and 240kV microfocus ray sources, breaking the monopoly of the same type of products in this field by imported equipment. It is worth noting that in 2024H1, the company continued to maintain healthy growth in a number of products from multiple major customers, successfully opened the Korean dental CBCT market and began to deliver in batches, medical and industrial X-ray integrated solutions were sold in small batches, and C-arm detectors, breast detectors and other products performed well. In addition, the company has made initial progress in new core components and solutions such as high-voltage generators and combined radiation sources, with a revenue scale of nearly 100 million yuan.

As we mentioned in the company's in-depth report "The Leader of Domestic Digital X-ray Detectors", the company is in the leading position in the industry in terms of cost advantages, customer quality, and technical reserves, and the rapid growth of the company's performance depends more on the expansion speed of the new product pipeline than the marketing ability. We believe that since 2023, the company has gradually entered the fast lane in terms of new pipeline expansion and R&D, and with the gradual deepening of cooperation with traditional key customers and the continuous opening of growth ceilings for new production lines and new products, the company's market position and global market share are expected to continue to improve steadily, and we continue to be optimistic about the company's medium and long-term development potential.

Profitability analysis:

Gross profit margin and net profit margin: 2024Q1-3 The company's gross profit margin was 54.3%, down 4.4pct year-on-year, and the net profit margin on sales was 27.9%, down 2.4pct year-on-year. We expect it to be mainly related to changes in product mix. Period expense ratio:

2024Q1-3 The company's sales expense rate increased by 0.8pct year-on-year, the management expense rate increased by 1.4pct year-on-year, the financial expense rate increased by 1.5pct year-on-year, and the R&D expense rate increased by 5.1pct year-on-year. Looking forward to 2024-2026, we believe that with the large-scale dilution of the company's low-gross margin new products, the company's gross profit margin is expected to gradually recover, and the operating expense ratio is expected to gradually decrease.

Operating cash flow: 2024Q1-3 The company's net operating cash flow was 200 million yuan, YOY 56.9%, and the ratio of net operating cash flow to net operating income was 60.8%, a significant year-on-year increase.

Profit forecast and valuation:

We expect the company's EPS to be 4.16, 4.92, and 5.92 yuan in 2024-2026, and the current stock price corresponds to 28.1 times PE in 2024 Rating.

Risk Warning:

The volatility risk of the impact of equity incentives on apparent performance, the risk of changes in industry policies, and the risk that the promotion of new products is less than expected.