Forecast profit increased by 13.5% year-on-year, in line with market expectations

The company released a performance report, with revenue of 2.761 billion yuan (+14.5% YoY) and net profit attributable to the parent company of 552 million yuan (+13.5% YoY) in 2024, in line with market expectations.

Focus on

high-quality growth and adhere to a profit-oriented strategy. The company announced that the revenue in 2024 will be 2.761 billion yuan (+14.5 YoY), the net profit attributable to the parent company will be 552 million yuan (+13.5% YoY), and the corresponding net profit margin attributable to the parent company will be 20.0%, which is basically the same as the same period last year. We estimate that the revenue in 4Q24 was approximately RMB748 million (+12.3% YoY), and the net profit attributable to the parent in 4Q24 was approximately RMB101 million (+1.2% YoY), corresponding to a single-quarter net profit margin of 13.4%. According to the company's announcement, in 2024, a number of key R&D projects such as a new generation of three-arm clamps and ERCP upgrades and improvements will continue to be promoted, disposable internal medicine cholangioscopes will be smoothly promoted in international markets such as Europe, the United States, and Japan, and gradually enter the hospital market. We believe that in the face of the complex situation at home and abroad, the company adheres to independent research and development, medical and engineering innovation and industry-university-research cooperation, continues to deepen the domestic marketing market, further expands the coverage of overseas channels, and continuously optimizes and transforms production and operation methods, and is expected to continue to focus on high-quality growth.

Completed the acquisition of a European endoscopic consumables company and strengthened its overseas business layout. In September 2024, the company announced that it intends to purchase a 51% stake in CreoMedica S.L.U. (CME) with its own funds of no more than 36.72 million euros through its wholly-owned subsidiary, Nanwei Netherlands. According to the company's announcement on February 15, the two parties to the transaction have completed the equity delivery procedures and completed the transaction, CME was officially included in the company's consolidation scope, and the sales and OEM of medical device products are the company's core business, and the previous announcement disclosed its revenue in 2023 of about 31.942 million euros (+10.5% YoY). We believe that this acquisition is expected to strengthen the overseas business layout of CSM, help the company rapidly expand the European market and increase market share, and is also expected to supplement SNW's own product system and realize the promotion of CREO's product registration in China.

Earnings Forecast and Valuation

Taking into account the short-term fluctuations in domestic business development, we lowered our 2024 EPS forecast by 8.6% to RMB2.94, but considering the completion of the acquisition of CME subsidiaries and the continuous strengthening of our overseas business layout, we maintain our 2025 EPS forecast of RMB3.77 and introduce the 2026 EPS forecast of RMB4.43 for the first time. Maintain the target price of $86 (22.6% upside), corresponding to the 2025/2026 P/E ratio of 23x/19x, and the latest closing price corresponding to the 2025/2026 P/E ratio of 19x/16x, maintaining the outperform rating.

Risks R

&D is less than expected, the competitive landscape deteriorates, centralized procurement suppresses prices more than expected, and overseas commercialization is not smooth.