Accelerating PFA procedure volume and better-than-expected expense control prompt UBS to raise APT Medical's target price by 5.5% to RMB306

Overview

This report focuses on APT Medical's second-quarter operating performance, PFA volume growth, market share in its interventional business, the impact of volume-based procurement, and valuation. UBS believes rising PFA procedure volume and improved cost management support upward revisions to earnings forecasts. It maintains its "Buy" rating and raises its 12-month target price by 5.5% to RMB306.

Core views

APT Medical's second-quarter 2026 results exceeded expectations, with revenue and net profit attributable to shareholders increasing 26.6% and 27.2% YoY, respectively. By business, revenue from electrophysiology, coronary access, peripheral vascular intervention, OEM, and non-vascular intervention was approximately RMB190 million, RMB430 million, RMB145 million, RMB39 million, and RMB12 million, respectively, representing YoY growth of 54%, 23%, 19%, and 3%, and a decline of 8%. Electrophysiology was the fastest-growing segment, while coronary access remained the largest business by revenue. Regional growth was also strong. Second-quarter revenue from China and overseas markets was approximately RMB700 million and RMB120 million, respectively, increasing 24% and 47% YoY. Within overseas markets, revenue from Asia-Pacific, the Middle East and Africa, and Western Europe increased 51%, 73%, and 62% YoY, respectively. Domestic and overseas revenue accounted for 86% and 14% of the company's 2024 revenue, respectively, so the overseas business still operates from a relatively small base, but its growth has already significantly outpaced the domestic business. The report also notes substantial growth in sales of guidewires, balloon catheters, and angiographic catheters in Asia-Pacific, as well as improved acceptance of coronary products in Western Europe. PFA is the report's core incremental growth driver. The company disclosed that monthly PFA procedure volume exceeded 1,300 in the second quarter of 2026 and rose further to more than 1,500 in July–August. Management reiterated its established 2026 target of 14,000–15,000 procedures and stated that it would aim for 16,000 if the macro environment remains stable. The anti-corruption campaign has had limited impact on the PFA business. Regarding the product pipeline, the basket-shaped PFA catheter has been submitted for registration in China. The company expects to obtain approval from the National Medical Products Administration between 2026 and early 2027 and expects its PFA products to obtain CE certification in mid-2027. The coronary and peripheral intervention businesses continued to deliver procedure-volume growth in the Chinese market in the first half of 2026, despite the impact of the industry's anti-corruption campaign in some regions. Most of the company's products have market shares below 20%, significantly lower than the 30%–50% held by leading global peers. UBS therefore believes APT Medical still has substantial room for market share gains, while the company also views volume-based procurement as an opportunity to expand coverage and share. However, although volume-based procurement may boost sales volumes and penetration, it also poses the risk of greater-than-expected price reductions. There has been no new progress on the Fujian alliance's volume-based procurement program, and management expects the winning bid results to be announced by the end of 2026. The short-term quantitative assessment identifies a potential announcement regarding volume-based procurement for PFA catheters as a positive catalyst, with an approximate date of October 31, 2026. Regarding medium-term growth targets, one vesting condition under the company's equity incentive plan is that the 2025–2027 revenue CAGR for Group A and Group B incentive recipients reaches 23% and 20%, respectively. In terms of margins, the company expects its 2026 gross margin and net margin to remain broadly unchanged YoY, with selling and R&D expense ratios rising slightly and the administrative expense ratio remaining broadly stable. Based on better-than-expected cost management, UBS lowers its assumptions for selling and R&D expense ratios over the forecast period. At the same time, it raises the effective tax rate beginning in 2027 to converge with that of the parent company, Mindray. Taking these effects together, UBS raises its 2026 and 2027 EPS forecasts by 3.6% and 0.1%, respectively, versus its prior estimates. Rounded figures in the tables show that diluted EPS forecasts for 2026–2028 were revised from RMB6.85, RMB8.25, and RMB9.69 to RMB7.09, RMB8.26, and RMB9.80, representing changes of approximately 4%, 0%, and 1%, respectively. Consensus estimates for the same period are RMB7.11, RMB8.91, and RMB11.04, respectively. UBS forecasts APT Medical's revenue at RMB3.153 billion, RMB3.819 billion, and RMB4.559 billion for 2026–2028, respectively; net profit at RMB1.000 billion, RMB1.164 billion, and RMB1.382 billion; and diluted EPS at RMB7.09, RMB8.26, and RMB9.80. The target price is derived using DCF, with WACC unchanged at 6.8% and the terminal growth rate unchanged at 3.0%. The new target price is RMB306, up 5.5% from the previous target of RMB290, implying 2026E and 2027E P/E multiples of 43.1x and 37.1x. Based on the share price of RMB266.22 as of August 20, 2026, the report forecasts share-price appreciation of 14.9%, a dividend yield of 0.5%, and a stock return of 15.5%. Compared with the assumed market return of 6.8%, this implies a forecast excess return of 8.7%. UBS therefore maintains its 12-month "Buy" rating.

Analysis framework

UBS first uses second-quarter revenue and profit to assess operating trends and then breaks down the sources of growth by business segment and region. It subsequently evaluates the potential for further volume growth based on monthly PFA procedure volume, product registration progress, market shares, and volume-based procurement arrangements. For its earnings forecasts, UBS adjusts EPS based on expense control and the effective tax rate, then recalculates the target price using DCF and presents the valuation outcome through forecast P/E multiples and the expected 12-month return. The report also uses a short-term quantitative survey to identify a potential announcement regarding volume-based procurement for PFA catheters as a catalyst, although this short-term assessment has a different time horizon from the 12-month stock rating.

Methodology notes

• Valuation methodologyDCF discounted cash flow

  DCF valuation

  UBS discounts the company's future cash flows to present value and uses a 6.8% weighted average cost of capital and a 3.0% terminal growth rate to derive its RMB306 target price.

• Valuation methodologyP/E and PEG valuation

  Forward P/E review

  The target price is not calculated directly from P/E multiples, but UBS illustrates its valuation level using the 43.1x and 37.1x 2026E and 2027E P/E multiples implied by the target price.

• Event trading and behavioral financeEvent-driven analysis

  Short-term catalyst assessment

  The report regards a potential announcement regarding volume-based procurement for PFA catheters as a positive catalyst over the next three months and gives an approximate date of October 31, 2026. This assessment is intended to monitor a short-term event and does not replace the 12-month rating.

Asset mapping & comparison

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

• APT Medical (688617.SS)

  The Chinese advanced medical-device company covered by the report, whose growth thesis primarily derives from PFA volume growth, market share gains for interventional products, and overseas expansion.

  Strengths

  Second-quarter 2026 revenue and net profit attributable to shareholders both grew by more than 26%; monthly PFA procedure volume continued to increase; most products have market shares below those of global leaders, leaving room for gains; overseas revenue grew faster than domestic revenue.

  Weaknesses

  Most products currently still have market shares below 20%, second-quarter revenue from the non-vascular intervention business declined 8% YoY, and the PFA and overseas businesses remain in their volume-ramp and expansion phases.

  Comparison

  Most of the company's products have market shares below 20%, compared with approximately 30%–50% for leading global peers; its 2026–2028 EPS forecasts are also below consensus estimates for the same period.

  Risks

  Greater-than-expected price reductions under volume-based procurement, slower-than-expected PFA sales ramp-up, a lack of technological breakthroughs in high-end electrophysiology equipment, intensifying competition in tertiary hospitals, and slower-than-expected overseas expansion.

Key data

• Second-quarter 2026 performance growthRevenue +26.6% YoY; net profit attributable to shareholders +27.2% YoYThe report states that both results exceeded expectations
• Second-quarter 2026 revenue by businessElectrophysiology approximately RMB190 million; coronary access RMB430 million; peripheral vascular intervention RMB145 million; OEM RMB39 million; non-vascular intervention RMB12 millionYoY changes of +54%, +23%, +19%, +3%, and -8%, respectively
• Second-quarter 2026 revenue by regionChina approximately RMB700 million; overseas approximately RMB120 millionUp 24% and 47% YoY, respectively; Asia-Pacific, the Middle East and Africa, and Western Europe grew 51%, 73%, and 62%, respectively
• PFA procedure volumeMore than 1,300 per month in the second quarter; more than 1,500 per month in July–AugustThe company maintains its 2026 target of 14,000–15,000 procedures and aims to reach 16,000 if the macro environment remains stable
• Market share comparisonMost of the company's products are below 20%; leading global peers are at 30%–50%UBS therefore concludes that the company still has significant room for market share gains
• 2026–2028 EPS forecastsRMB7.09, RMB8.26, and RMB9.80Previously RMB6.85, RMB8.25, and RMB9.69, respectively; consensus estimates are RMB7.11, RMB8.91, and RMB11.04, respectively
• Key DCF parameters and target priceWACC 6.8%; terminal growth rate 3.0%; target price RMB306The parameters are unchanged, while the target price is raised by 5.5% from RMB290
• Valuation implied by target price2026E P/E of 43.1x; 2027E P/E of 37.1xBased on the RMB306 target price
• Forecast returnShare-price appreciation of 14.9%; dividend yield of 0.5%; stock return of 15.5%; excess return of 8.7%Based on the current price of RMB266.22 and an assumed market return of 6.8%

Impact & implications

UBS believes that the continued ramp-up in PFA procedure volume, the low existing market shares of the company's interventional products, and rapid growth in overseas revenue support further expansion. Better-than-expected expense control offsets the impact of a higher effective tax rate beginning in 2027, leading to modest improvements in earnings forecasts and a higher DCF-derived target price. However, price reductions under volume-based procurement, the pace of PFA volume growth, and overseas expansion will continue to determine whether this growth trajectory is realized.

Risks

• Price reductions in future volume-based procurement programs may exceed expectations.
• The ramp-up in sales and procedure volumes of PFA products may be slower than expected.
• High-end electrophysiology equipment may lack technological breakthroughs.
• Competition for penetration of the tertiary hospital market may intensify.
• Overseas market expansion may be slower than expected.

What to watch

• Monitor whether 2026 PFA procedure volume can reach 14,000–15,000 and potentially 16,000 if the macro environment remains stable.
• Monitor the potential announcement regarding volume-based procurement for PFA catheters. The short-term quantitative assessment gives an approximate catalyst date of October 31, 2026, while management expects the winning bid results to be announced by the end of 2026.
• Monitor whether the basket-shaped PFA catheter can obtain approval from the National Medical Products Administration between 2026 and early 2027.
• Monitor whether PFA products can obtain CE certification in mid-2027 as planned.