China Securities Co.,Ltd.: Multiple companies beat expectations in Q3; bullish on the trend of performance improvement in medical devices and services in 2027

China Securities Co.,Ltd. released a research report stating that the medical device sector's Q3 revenue continued its growth trend, with quarterly profit achieving positive growth for two consecutive quarters. Multiple leading companies beat expectations, and their performance is expected to accelerate in 2027. Among them, the high-value consumables segment saw growth under pressure due to centralized procurement policies and demand, with growth diverging among companies in the segment; the medical equipment segment continued to see improvement in tendering, with year-on-year revenue growth picking up compared to the first half, and profit returning to positive growth; the IVD segment achieved positive revenue growth for two consecutive quarters, and with policies such as the inspection project guidelines gradually being implemented, the domestic market is expected to reach an inflection point. Medical services Q3 revenue continued positive growth, with profitability somewhat repaired. China Securities Co.,Ltd.'s main views are as follows: The medical device sector has achieved positive revenue growth for five consecutive quarters and positive net profit attributable to parent for two consecutive quarters, basically confirming the sector's performance inflection point. In 26Q3, the medical device sector's revenue, net profit attributable to parent, and net profit attributable to parent after deducting non-recurring gains and losses grew by +9.64%, +22.72%, and +43.29% year-on-year, respectively. From the revenue side, since 25Q3, the medical device sector's revenue has achieved positive growth for five consecutive quarters, showing a trend of gradual acceleration; from the profit side, Q3 profit not only continued the rapid growth trend of Q2, but Q4 is expected to continue achieving rapid growth against a low base. By segment: High-value consumables: 26Q3 continued the recovery trend of Q2, but different sub-segments diverged; the cardiovascular segment performed well, while orthopedics, ophthalmology, and neurosurgery saw short-term performance under pressure due to the pace of centralized procurement renewals; the national procurement of digestive intervention had a significant impact on the domestic business of relevant companies, but overseas business maintained a high growth trend, partially offsetting the impact of centralized procurement. Medical equipment: 26Q3 revenue growth further picked up compared to the first half, mainly due to marginal recovery in domestic end-market tendering and procurement demand, coupled with some companies increasing domestic market share and rapidly expanding overseas business. Q3 profit reversed the downward trend of the first half, achieving substantial year-on-year growth, on the one hand due to the low profit base in the same period last year, and on the other hand thanks to the acceleration in sector revenue growth in Q3 compared to the first half. IVD: 26Q3 revenue growth further accelerated quarter-on-quarter versus 26Q2. On the one hand, the IVD segment in 25Q3 was still affected by multiple policies with a low base, and the policy impact marginally weakened in 26Q3; on the other hand, overseas business became an important growth driver, and in addition, certain companies' horizontal mergers and acquisitions contributed partial revenue increments. Profit repair was more evidentagainst a low base, the sector's profit growth has maintained above 50% for two consecutive quarters. Home medical devices: In 26Q3, domestic performance of home medical device companies was in a state of steady recovery, mainly due to overall stable domestic consumer demand and improved demand sentiment in some categories; overseas markets remain a key focus for domestic home device companies, with overseas business continuing to grow rapidly. Low-value consumables: 26Q3 low-value consumables sector revenue grew steadily, while profit growth declined quarter-on-quarter due to foreign exchange gains/losses and the negative impact of fair value changes in certain companies' wealth management products. Medical devices: Multiple companies beat expectations in Q3, with performance expected to improve in 2027, and the sector effect will gradually manifest. Affected by factors such as consumables centralized procurement and heightened medical compliance requirements, the A-share SW medical device index continued to decline from 2021 to 2024, rose then fell in 2025, and rebounded before pulling back in early 2026. As policy impacts gradually clear and corporate performance gradually recovers after strategic adjustments, the device sector is ushering in a dual repair of valuation and performance. In Q3, multiple companies including Shanghai United Imaging Healthcare, APT Medical Inc., ShenZhen New Industries Biomedical Engineering, and Shanghai Microport EP Medtech saw revenue or profit beat expectations in Q3, and it is expected that in 2027 the performance of multiple companies including Shenzhen Mindray Bio-Medical Electronics, ShenZhen New Industries Biomedical Engineering, and Jiangsu Yuyue Medical Equipment & Supply is expected to accelerate. The medical device sector effect will gradually emerge, with opportunities for both first- and second-tier companies. It is expected that public fund holdings in medical devices will gradually increase, and it is recommended to increase allocation to the medical device sector. Medical services: 26Q3 sector revenue maintained positive growth, with profitability somewhat repaired. In 2026Q1~3, the sector's revenue, net profit attributable to parent, and net profit attributable to parent after deducting non-recurring gains and losses grew by 2.85%, -4.64%, and -4.06% year-on-year, respectively. In 2026Q3, the sector's revenue, net profit attributable to parent, and net profit attributable to parent after deducting non-recurring gains and losses grew by 5.02%, 11.47%, and 12.50% year-on-year, respectively. In 26Q3, sector revenue maintained positive growth, mainly benefiting from improved revenue at general hospital companies and recovering revenue growth at consumer medical companies; Q3 profit growth was faster, mainly due to the low base in 25Q3. In the first three quarters of 2026, sector profit growth declined, mainly due to the significant one-time impact of Aier's supplementary tax payments and late fees in Q2. Risk warnings Industry policy risk: Risks of changes in research and design requirements, price changes, centralized volume-based procurement policy changes, and changes in medical insurance reimbursement scope and ratios brought about by industry policy adjustments. In particular, changes in centralized procurement and medical insurance payment policies have a significant impact on industry development expectations. R&D below-expectations risk: During the R&D process of new drugs and devices, there are risks of uncertain clinical enrollment progress and uncertain efficacy and safety data results. Approval below-expectations risk: During the approval process, there are risks of extended approval cycles due to factors such as supplementary materials and changes in approval procedures. Macro environment fluctuation risk: Further slowdown in global economic growth may affect downstream demand; in addition, risks related to international relations, climate change, inflation, and exchange rates and interest rates need to be considered.