United Imaging Healthcare research notes: overseas growth and domestic market share gains are the key themes

Overview

This report is a Morgan Stanley research note on Shanghai United Imaging Healthcare Co's China healthcare coverage, focusing on the latest management discussions regarding overseas expansion, domestic market share, gross margin, FX losses, tax rate, and valuation methodology. The report shows strong growth in the company's overseas business; the slowdown in domestic tenders is viewed by management as a seasonal effect caused by the later Lunar New Year, and full-year industry sales are still considered healthy.

Core views

First, the overseas market is the key driver of United Imaging Healthcare's medium- to long-term growth; the company remains confident in 50% overseas revenue growth in 2026 and plans for overseas revenue to account for about 50% of group revenue by 2030; second, domestic equipment market share has continued to rise, reaching about 26% in 2025, and management believes the medium-term target of above 30% is achievable, though a share above 40% would require more aggressive sales and marketing investment; third, overseas prices are about 15%-20% lower than global peers, and the gap has narrowed versus past years; overseas gross margin is only about 2 percentage points below China, while U.S. gross margin is already close to China's; fourth, the high-end ultrasound business will advance in phases through KOL penetration, direct sales and customer training, and gradual distributor expansion.

Analysis framework

The report primarily combines qualitative and quantitative analysis of the company's overseas growth, domestic share, profitability, and risks based on the research note, management discussions, Morgan Stanley ModelWare forecasts, and a DCF valuation framework.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The base case uses a DCF approach to reflect the company's future healthy operating cash flows; key assumptions include an 8.8% WACC, a 4.0% perpetual growth rate, and a normalized corporate tax rate of 13.5%, with the model starting in 2026.

• ForecastMorgan Stanley ModelWare

  Morgan Stanley internal forecasting framework

  Financial metrics are based on the Morgan Stanley ModelWare framework unless otherwise noted; 2025e to 2027e are Morgan Stanley Research estimates.

Asset mapping & comparison

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

• Shanghai United Imaging Healthcare Co (688271.SS)

  Core coverage asset

  Strengths

  Strong overseas growth momentum, with clear management targets; domestic equipment market share continues to rise; AI/software capabilities are gaining recognition overseas; U.S. gross margin is already close to China's.

  Weaknesses

  1Q26 included FX losses, and the tax rate temporarily rose to 18.4% because losses at overseas subsidiaries could not be offset; the high-end ultrasound business still needs phased KOL penetration, direct-sales training, and channel expansion.

  Comparison

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

  Risks

  Tighter regulation, reduced government support for capital expenditure, deterioration in operating margins due to an unfavorable product mix, slower-than-expected overseas expansion and recurring revenue growth, and geopolitical risk.

• China medical device industry

  Industry backdrop and demand environment

  Strengths

  Full-year industry sales are still expected by management to remain healthy, and there is still room for domestic substitution and share gains.

  Weaknesses

  1Q26 equipment tendering slowed, which management attributed to the later Lunar New Year as a seasonal effect, though the pace of recovery still needs to be monitored.

  Comparison

  United Imaging Healthcare's domestic equipment share is about 26%, leaving room for improvement relative to the medium-term target of above 30%.

  Risks

  Policy disruptions, changes in tendering pace, and reduced government capital expenditure support.

Key data

• Target priceRmb164.00Compared with the 2026-05-13 closing price of Rmb114.51, upside is 43%.
• Current ratingEqual-weightMorgan Stanley's stock rating under its relative rating framework.
• Industry viewAttractiveMorgan Stanley's view on the relevant industry coverage universe.
• Overseas growth target50% overseas revenue growth in 2026Management reaffirmed confidence in 50% overseas growth in 1H26 and for the full year; 1Q26 growth was about 27%.
• 2030 overseas revenue contribution targetAbout 50%Management targets overseas revenue to account for about half of group revenue by 2030.
• Domestic market shareAbout 26% in 2025; medium-term target above 30%Management believes the path to above 30% market share is clear.
• Overseas price gapAbout 15%-20% below global peersThe report believes the gap has narrowed versus the past few years.
• Overseas gross margin gapAbout 2 percentage points below ChinaU.S. gross margin is already close to China's, supported by local production and a higher service attach rate.
• 1Q26 FX lossAbout Rmb30mnThe report disclosed an FX loss of about RMB 30 million in the first quarter.
• 1Q26 tax rate18.4%It rose because losses at overseas subsidiaries were not offset against China profits, and is expected to normalize in FY26.
• 2024-2027e revenueRmb10,300.1mn至Rmb18,137.6mnThe forecast table shows revenue increasing year by year.
• 2024-2027e EPSRmb1.53至Rmb3.39EPS continues to rise during the forecast period.
• 2024-2027e EBITDARmb1,672.9mn至Rmb3,581.1mnEBITDA continues to rise during the forecast period.

Impact & implications

If United Imaging Healthcare can deliver overseas revenue expansion, domestic market share gains, and gross margin improvement, revenue and earnings growth could support further valuation upside; however, the Equal-weight rating indicates that Morgan Stanley remains cautious on a relative-return basis, and investment judgment must also consider regulatory risk, government capital expenditure support, overseas expansion pace, margins, and geopolitical risk.

Risks

• Unexpected regulatory tightening.
• Reduced government support for capital expenditure.
• Deterioration in operating margins due to an unfavorable product mix.
• Slower-than-expected overseas expansion and recurring revenue growth.
• Geopolitical risk.
• Rising raw material prices, including higher helium prices, may offset gross margin improvements from a better product mix and supply-chain optimization.

What to watch

• Whether overseas revenue achieves the 50% growth target in 1H26 and for the full year 2026.
• The pace at which the overseas revenue mix moves toward the 2030 target of about 50%.
• Whether domestic equipment tendering recovers after the Lunar New Year effect and whether full-year industry sales remain healthy.
• Whether domestic market share can rise from about 26% in 2025 to above 30% in the medium term.
• The phased progress of KOL penetration, direct-sales training, and distributor expansion for the high-end ultrasound business.
• Whether the roughly 2 percentage point gap between overseas gross margin and China gross margin continues to narrow.
• FX losses, the offset treatment of losses at overseas subsidiaries, and the normalization of the FY26 tax rate.