United Imaging Healthcare's overseas growth and domestic share gains path is further confirmed by management

Overview

This report is Morgan Stanley's China healthcare research takeaways on Shanghai United Imaging Healthcare Co (688271.SS), focusing on the company's overseas expansion, domestic market share gains, high-end ultrasound progress, gross margin trends, and valuation methodology. The report shows that UIH management remains confident in overseas business growth and the target of overseas revenue accounting for about 50% by 2030, while believing that the short-term slowdown in domestic equipment tendering is mainly due to seasonal factors.

Core views

The core views are as follows: first, overseas business remains the main growth engine, and management is confident in 50% overseas business growth in both 1H26 and full-year 2026; second, the gross margin gap between overseas markets and China is about 2 percentage points, while U.S. gross margin is already close to China, supported by localized production and a higher service attach rate; third, domestic medical imaging equipment share continues to rise, reaching about 26% in 2025, and the medium-term 30%+ market share target appears achievable; fourth, the high-end ultrasound business is pursuing a phased market-entry strategy; fifth, the rating remains Equal-weight, indicating that fundamental improvement has already been partially reflected in valuation.

Analysis framework

The report is based on management communication, healthcare field research, Morgan Stanley ModelWare forecasts, a DCF valuation framework, and peer/industry rating systems, with a focus on revenue growth, overseas revenue mix, gross margin, tax rate, foreign exchange gains and losses, market share, and valuation multiple changes.

Methodology notes

• Valuation methodDCF

  Discounted cash flow valuation

  The base case uses a DCF method, with key assumptions including an 8.8% WACC, a 4.0% perpetual growth rate, and a 13.5% normalized corporate tax rate, with the model starting in 2026.

• Forecast frameworkMorgan Stanley ModelWare

  Broker internal financial forecasting framework

  Revenue, EBITDA, EPS, net income, and valuation multiples in the financial statements are based on Morgan Stanley ModelWare, and 2025e to 2027e are research estimates.

• Rating systemMorgan Stanley relative rating system

  Relative rating

  Equal-weight means the risk-adjusted total return over the next 12-18 months is expected to be roughly in line with the average of stocks covered by the analyst, and it is not equivalent to a simple buy/hold/sell recommendation in the traditional sense.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Shanghai United Imaging Healthcare Co (688271.SS)

  Core coverage company in the report

  Strengths

  Strong overseas growth momentum, rising domestic imaging equipment share, a clear target for overseas revenue contribution by 2030, and growing recognition of AI/software capabilities in overseas markets.

  Weaknesses

  There was an FX loss in 1Q26, the tax rate rose in the short term, high-end ultrasound still needs to gradually open up the market, and overseas expansion requires strong execution capability.

  Comparison

  Overseas pricing is about 15%-20% below global peers, and the gap has narrowed versus the past; overseas gross margin is only about 2 percentage points below China.

  Risks

  Overseas expansion slower than expected, recurring revenue growth below expectations, insufficient sustainability of government capital expenditure, and margin pressure from a deteriorating product mix.

• China medical device industry

  Industry and demand backdrop for the company

  Strengths

  Full-year industry sales are still expected to remain healthy, and there is room for domestic high-end equipment localization and share gains.

  Weaknesses

  Equipment tendering may be affected by seasonality, fiscal pacing, or policy changes.

  Comparison

  Morgan Stanley's industry view is Attractive, indicating appeal versus the broader market benchmark.

  Risks

  Policy disruptions, slower hospital capital expenditure, and rising raw material prices.

Key data

• Current ratingEqual-weightThe rating record shows Shanghai United Imaging Healthcare as E, dated 2025-02-21.
• Target priceRmb164.00This implies about 43% upside versus the 2026-05-13 closing price of Rmb114.51.
• Current share priceRmb114.51Price date is 2026-05-13.
• Overseas revenue targetAbout 50% of group revenue by 2030Management target.
• Overseas growth targetAbout 50% growth in 1H26 and full-year 20261Q26 overseas growth was about 27%.
• Domestic market shareAbout 26% in 2025; medium-term target of 30%+Management believes there is a clear path to 30%+.
• Overseas gross margin gapAbout 2 percentage points below ChinaU.S. gross margin is already close to China, supported by local production and a higher service attach rate.
• 1Q26 FX lossAbout Rmb30mnThe report noted foreign exchange losses in the first quarter.
• 1Q26 tax rate18.4%Overseas subsidiary losses could not offset China profit, pushing up the tax rate; FY26 is expected to normalize.
• 2027e revenueRmb18,137.6mnFinancial forecasts show net revenue rising from Rmb10,300.1mn in 2024 to Rmb18,137.6mn in 2027e.
• 2027e EPSRmb3.39EPS is expected to increase from Rmb1.53 in 2024 to Rmb3.39 in 2027e.

Impact & implications

If overseas expansion, AI/software recognition, and improvements in service revenue attach rates continue to materialize, UIH's revenue mix, gross margin, and cash flow quality are expected to improve; however, the Equal-weight rating indicates that the analyst still expects the company's relative return to be around the industry average, and the investment conclusion must balance valuation, execution pace, policy support, and product mix changes.

Risks

• Reduced government support for capital expenditure.
• Deterioration in operating margin due to unfavorable product mix changes.
• Overseas expansion and recurring revenue growth slower than expected.
• Rising raw material prices, including helium, may offset gross margin benefits from supply chain optimization and product mix improvements.
• Foreign exchange fluctuations may create P&L volatility.
• If losses at overseas subsidiaries cannot be effectively offset, the group's tax rate may rise temporarily.

What to watch

• Whether 2026 overseas revenue growth reaches management's target of about 50%.
• The pace of progress toward the 2030 target of overseas revenue contributing about 50%.
• Whether domestic medical imaging equipment tendering recovers after the Lunar New Year and whether full-year industry sales remain healthy.
• Progress in raising domestic market share from about 26% in 2025 toward 30%+ in the medium term.
• Execution of high-end ultrasound across the three stages of KOL penetration, direct sales training, and distributor expansion.
• Whether the gap between overseas gross margin and China gross margin continues to narrow, especially in the United States, India, Singapore, South America, and Asia.
• The impact of raw material prices, exchange rates, and tax rates on margins and net profit.