Investment Rating - The industry investment rating is "Positive" [1] Core Viewpoints - The medical device sector is currently at a valuation bottom, with a significant acceleration in domestic substitution expected. The recovery of hospital procurement and the completion of centralized procurement are anticipated to enhance the performance of domestic companies [3][41] - The report highlights the potential for substantial growth in high-value consumables, particularly in areas such as electrophysiology, orthopedics, coronary intervention, and artificial lenses, as companies emerge from the impacts of centralized procurement and inventory adjustments [3][41] - The medical equipment segment is expected to see a recovery in performance in the second half of 2025, driven by the resumption of hospital procurement and overseas expansion [3][44] - The home medical device market is projected to regain growth due to a recovering consumer environment and ongoing new product investments [3][54] Summary by Sections Valuation - The medical device sector is currently at historical low valuations, with medical equipment at a PE of 32x, medical consumables at 30x, and in vitro diagnostics (IVD) at 24x as of April 30, 2025 [9] Growth Potential - Demand for low-value and high-value consumables remains stable, with expected positive revenue growth in 2024. However, other segments like medical equipment and IVD are experiencing revenue and profit declines due to procurement impacts [12][13] Profitability - Profitability has declined across most segments except for low-value consumables, with net profit margins decreasing in 2024. The report notes that the recovery of net profit margins is expected in 2025 as expense ratios decrease [25][31] Operational Efficiency - High-value consumables have achieved the highest accounts receivable turnover since 2020, indicating improved operational efficiency as companies adjust to the impacts of centralized procurement [32] Domestic Substitution - The report emphasizes the acceleration of domestic substitution in high-end medical devices due to increased tariffs and competitive product capabilities. Companies with low domestic production rates and significant import substitution potential are recommended [39][41] Investment Recommendations - The report suggests investing in high-value consumables companies that are entering a growth phase post-centralized procurement, as well as medical equipment and home medical device companies that are expected to see steady revenue growth [54]