this report guide:

the company's high-end models to achieve good installation, AQ300 is expected to drive the effect is obvious, followed by the increase in clinical recognition, installed growth is expected to increase.

investment points:

maintain an overweight rating. The company released its annual report, with revenue of 0.678 billion yuan (-52.29%) and net profit of 0.058 billion yuan (-167%) in 2023, in line with expectations. Maintain the 2024-2025 EPS forecast of $0.78/1.30 and add the 2026 EPS forecast of $2.17. Referring to comparable company valuations, the company was given a 2024 PS9.3X, raising its target price to $69.47, maintaining an overweight rating.

in the high-end models to achieve better installed, AQ300 driving effect is obvious. In 2023, the sales revenue of endoscope equipment was +58.63, while the sales volume of endoscope mainframe was 3518 (+13.13) and mirror body was 6200 (+22.19). The revenue growth rate was faster than the sales growth rate, indicating that the unit price of mainframe and mirror body increased significantly. Gross profit margin reached 73.78 (+4.05) in 2023, which also increased significantly. Considering that AQ300 increased compared with AQ200 ex-factory price and gross profit margin, AQ300 revenue contribution is expected to be higher. According to the annual report, in 2023, the number of mid-to-high-end mainframes and mirrors installed in tertiary hospitals was 96 and 316 respectively, 73 tertiary hospitals were installed, and AQ200 and AQ300 achieved relatively good installation. In the future, with the company's product performance further clinically recognized, new categories continue to be introduced, the installation speed is expected to accelerate.

a variety of new mirror body listed, open the tertiary hospital market. Since 2023, a number of mirror bodies, including duodenal mirror, ultra-fine endoscope, double-focus endoscope, split upper gastrointestinal endoscopy, etc., are expected to enhance the competitive advantage of the bidding end and clinical academic recognition. The 4K plus optical amplification function of the AQ300 provides a clearer view and better clinical feedback, and the installed capacity is expected to be further increased in 2024.

net interest rates continue to climb, income growth is more important. In 2023, the company's sales expense rate of 34.27 (plus 4.67pct), new product promotion in the early stage still need to invest a lot of marketing, management expense rate fell sharply by 5.54pct, highlighting the scale advantage. Follow-up with the promotion into a stable period, net interest rate is expected to gradually improve.

Risk Warning: Product commercialization is less than expected, research and development is less than expected, etc.