Summary of Shanghai United Imaging Healthcare Co. Conference Call Company Overview - **Company**: Shanghai United Imaging Healthcare Co (UIH) - **Ticker**: 688271.SS - **Industry**: Healthcare, specifically medical imaging and equipment - **Market Cap**: Rmb116,865.6 million - **Stock Rating**: Equal-weight - **Price Target**: Rmb140.00 - **Current Price**: Rmb141.80 Key Takeaways Financial Performance - **2Q Revenue Growth**: Revenue increased by 18.6% YoY, aligning with Morgan Stanley estimates. - **Segment Performance**: - CT: +6% - MR: +17% - MI: +13% - XR: +27% - RT: flat - Service income: +32% [9] - **Geographical Performance**: - China: +20% YoY due to equipment trade-in orders converting to sales - Overseas: +11% YoY despite a challenging base [9] - **Gross Profit Margin (GPM)**: Dropped by 4.5 percentage points YoY due to Value-Based Pricing (VBP) pressure, but offset by 5.3 percentage points of operating expense ratio savings [9] - **Net Profit**: Recurring net profit rose by 18.0% YoY, exceeding Morgan Stanley estimates by 22% [9] Growth Drivers - **New Product Launches**: Newly approved products such as photon-counting CT uCT Ultima and uCT SiriuX are expected to support near-term growth [3] - **Overseas Expansion**: Anticipated faster growth in overseas markets in 2H, with significant YoY increases in the EU (+67%) and US (+94%) in 1H25 [4] - **Policy Support**: The Ministry of Finance announced a Rmb188 billion ultra-long STB for the 2025 "equipment trade-in" program, with Rmb20 billion allocated for medical equipment, similar to 2024 [2] Profitability Outlook - **Profitability Recovery**: UIH expects notable recovery in GPM in 2H, with selling, general & administrative (G&A), and R&D ratios guided at approximately 15%, 4-5%, and less than 15% respectively [3] Risks and Challenges - **Regulatory Risks**: Potential for unexpected regulatory tightening and reduced government support for capital spending [12] - **Market Share Risks**: Risks of market share losses and deteriorating operating profit margin (OPM) due to unfavorable mix shifts [12] Valuation and Estimates - **Earnings Per Share (EPS) Estimates**: - 2025: Rmb2.07 - 2026: Rmb2.67 - 2027: Rmb3.28 [6] - **Valuation Methodology**: Based on a discounted cash flow (DCF) model with a WACC of 8.8% and a terminal growth rate of 4.0% [10] Conclusion - **Investment Thesis**: With an improving policy backdrop, new product launches, and deepening high-end user reach, UIH is positioned for sustained growth despite potential regulatory and market share risks [9][12]