United Imaging reported 1H24 revenue of RMB5,333mn, up by 1.2% YoY. Attributable net profit increased by 1.3% YoY to RMB950mn. Despite facing a challenging domestic market environment characterized by stringent industry regulations and delays in equipment renewal projects, United Imaging delivered resilient performance thanks to the rapid growth of overseas business and maintenance services. The rising revenue contribution from mid-to-high-end products and services drove the company's gross margin up by 1.7ppts YoY to 50.4% in 1H24. Additionally, United Imaging announced an interim dividend plan, committed to distributing a total cash dividend of approximately RMB98.2mn, which represents a more than 10% payout ratio.

Market share expanded in domestic medical equipment market. In 1H24, United Imaging’s equipment revenue decreased by 1.8% YoY to RMB4,540mn, primarily due to the delays in procurement activities. However, leveraging its product innovation and new product commercialization, the company’s high-end and ultra-high-end products gained market share. For instance, the market share of mid-to-high-end and ultra-high-end CT system increased by 11ppts YoY and 8ppts YoY, respectively. Its 3.0T MRI systems also gained 1.3ppts in market share of 3.0T MRI market. The company continues to hold a significant lead in ultra-high-filed MRI market with its 5.0T MRI system and saw a 5.3ppts YoY increase in market share of RT systems.

International operations sustained strong growth momentum. In 1H24, the company's overseas business achieved revenue of RMB933mn, up 29.9% YoY, accounting for 17.5% (+3.9ppts) of total revenue. The company delivered robust performance in Asia-Pacific, North America, and emerging markets, where revenues grew over 40% YoY, 26% YoY, and 132% YoY, respectively. Despite a 30% decrease in revenue from Europe due to seasonal fluctuations, efforts aimed at localizing operations in key European markets such as France, Italy, Germany, and Spain are anticipated to drive recovery in 2H24.

Growing contribution from services. In 1H24, revenue from maintenance services increased by 23.8% YoY to RMB617mn, accounting for 11.6% (+2.1ppts YoY) of the total revenue. Currently, United Imaging’s global installed base has exceeded 20,000 units. With a growing installed base, we expect the services revenue will continue to increase rapidly.

Maintain BUY. We expect hospital procurement to gradually recover from 4Q24. Based on a 9-year DCF model, we adjust the target price to RMB 125.83 (WACC: 8.8%, perpetual growth rate: 3.0%).