Zheshang: Multiple factors intertwine across medical device sub-sectors; low-value consumables sector shows standout performance.

Zheshang released a research report stating that looking ahead to the second half of 2026, the bank believes that the external development environment and internal development logic of medical device sub-sectors differ slightly, with multiple factors intertwined. It recommends focusing on: companies with sufficiently adjusted stock prices and emerging earnings inflection points; medical device companies benefiting from the recovery of in-hospital tendering and bidding and continued overseas expansion; medical consumables companies that are expanding into innovative cross-sector layouts with products being continuously launched. Zheshang's main views are as follows: Sector review: Overall still at a low level, with low-value consumables leading gains Review since 2020: Although the valuation of medical devices recovered somewhat in the first half of 2026, driven by the continued recovery of tendering and bidding since 2026, earnings inflection points at some companies, sustained high prosperity in overseas expansion, and continued catalysis from innovation policies, overall medical device valuations remain at a relatively low historical level. Review since 2026: Low-value consumables may have benefited from glove price increases, leading gains among all sub-sectors and outperforming the CSI 300 and the pharmaceutical and biotechnology (SW) index. Other sub-sectors are still in a low-level bottoming phase, with stock prices poised for movement. Fundamental review: Revenue has resumed growth across the board, but profits have diverged Growth: All medical device sub-sectors have resumed positive growth, with the low-value consumables sector performing notably. Among them, low-value consumables, home medical devices, and medical equipment sectors achieved double-digit or higher year-on-year revenue growth in 1H26, with low-value consumables achieving yoy+20.1% growth due to the transmission of oil price increases. Gross margin: The gross margin of low-value consumables improved significantly (+7.2pct), possibly due to notable improvement in glove prices, while other sectors fluctuated little; the three expenses declined overall, but with divergence across sectors: thanks to an overall improvement in the industry's expense control capabilities, the three expenses declined in all sub-sectors except home medical devices. Home medical devices may have seen a notable increase in the sales expense ratio due to the launch and promotion of new products; Net margin: Compared with 1H25, the net margin levels of the IVD and low-value consumables sectors in 1H26 both improved notably, possibly due to a low base effect. Net profits in other sub-sectors were significantly affected by factors such as foreign exchange gains and losses Operating capability: The accounts receivable turnover ratios of the home medical devices, IVD, and low-value consumables sectors all improved. Considering that inventory turnover and asset turnover remained stable, the ROE of the IVD and low-value consumables sectors improved somewhat. Marginal changes: Since 2026, the stock prices of A-share cross-sector innovation companies have risen significantly, while H-shares have come under overall pressure. Risk warnings: Risks of product R&D and commercialization falling short of expectations, risks of intensified industry competition, and risks of policy uncertainty.