Challenging the dominance of imported brands in the Chinese market with a complete medical imaging product line: United Imaging Healthcare's extensive medical imaging product line covers computed tomography (CT), magnetic resonance imaging (MR), X-ray imaging (XR), molecular imaging (MI) and radiation therapy (RT). According to the company's 2023 annual report, United Imaging Healthcare's share of many segments of China's medical imaging market that has been monopolized by multinational companies for a long time is among the highest. The company's CT product line (accounting for 41% of revenue in 2023) covers a wide range of markets from low-end to high-end, and we expect to benefit from the acceleration of domestic substitution, the development of high-end technology and the sinking trend of medical resources. We believe that MR products (33% of 2023 revenue) will be a key force to drive revenue growth in the future, relying on our core technology in-house development and full market coverage strategy. At the same time, we expect that the company's other product lines (MI, XR and RT) will also achieve steady growth, driven by the process of domestic substitution and intelligent upgrading. Although we expect a short-term policy impact on the company's performance in 2024, we believe that the company's performance will resume growth momentum from 2025 onwards, with a revenue CAGR of 14.2% in 2023-2026E, and we estimate the revenue CAGR of the company's CT/MR/XR/MI/RT product line in 2023-2026E to be -4.6%/24.4%/14.1%/26.4%/26.5%, respectively.

Global expansion and technological innovation will drive the company's performance to further growth: United Imaging Healthcare has leveraged its technological leadership and innovative products to build a global sales network, as well as a strong after-sales service and technical support system. According to the 1H24 financial report, the company's overseas business revenue reached 933 million yuan, a year-on-year increase of 29.9%, accounting for 17.5% of the total revenue. With the first-mover advantage among domestic peers, we believe that United Imaging Healthcare is expected to further expand its influence in the international market. In terms of R&D, the company will launch groundbreaking products in 2024, including the world's first 5T whole-body clinical ultra-high-field MR, as well as an innovative integrated CT toroidal linear accelerator.

Initial coverage gives a "buy" rating and a DCF TP of RMB194.39 (WACC:9.0%): Our TP corresponds to the company's 2025 valuation of 74xPE, which is higher than the industry average of 61xPE and the company's average valuation since listing (67x). We are optimistic about the company's future development prospects, mainly due to: 1) benefiting from technological progress and policy support, industry demand growth; 2) The company's product line is comprehensive, and the market share of mid-to-high-end and ultra-high-end products has increased; 3) Overseas business has great potential, and the recognition of the international market has increased, which has helped the performance growth.

Risk Warning: Core Component Procurement Risk; the risk that the R&D progress is less than expected; intensified market competition, sales less than expected risk; international business risks; China's healthcare policy risks.