Sonoscape Medical posts modest second-quarter revenue growth and an earnings decline; Nomura maintains Buy rating

Overview

This report reviews Sonoscape Medical's 1H26 and implied 2Q26 results. Second-quarter revenue continued to grow, but weak domestic sales, a lower gross margin, reduced other income, and higher expenses weighed on earnings. Management did not revise its FY26E growth and net profit margin guidance, leading Nomura to maintain its Buy rating and DCF-based target price.

Core views

Sonoscape Medical released its 1H26 results and held an earnings conference call after the market close on August 21, 2026. First-half revenue increased 9.2% YoY to CNY1.05bn, but net profit declined 70.7% YoY to CNY14mn, with the report identifying negative foreign-exchange effects as the main drag. The divergence between revenue growth and the sharp earnings decline reflects significantly greater pressure on profitability than on revenue during the period. Based on the half-year data, Nomura estimates that 2Q26 revenue increased 7.2% YoY to CNY573mn. Quarterly growth was driven mainly by two factors: first, overseas endoscopy sales accelerated significantly, increasing more than 50% YoY based on Nomura's estimates; second, new-business sales continued to ramp up. In contrast, domestic sales were weaker than expected because tender prices for ultrasound and endoscopy products declined. This resulted in a business mix in which overseas operations and new businesses supported growth, while domestic pricing pressure constrained the overall growth rate. 2Q26 net profit was CNY25mn, down 34.8% YoY. The report attributes the earnings decline to a lower gross margin, reduced other income, and an increase in absolute operating expenses. In other words, although quarterly revenue continued to grow, weaker gross profit and non-operating income, combined with expense expansion, prevented revenue growth from translating into earnings growth. Despite weak first-half performance, particularly on the earnings side, management reiterated its target of approximately 15% YoY revenue growth for FY26E. This target assumes high-single-digit YoY growth in FY26E ultrasound sales and 15% to 20% YoY growth in endoscopy sales. Management also maintained its FY26E net profit margin guidance of 15%. Whether the guidance can be achieved will depend on the realization of the growth assumptions for these two core businesses and whether profitability can recover from the pressure experienced in the first half. Nomura maintained its Buy rating and kept its DCF-based target price unchanged at CNY34.11. The target price is based on a discounted cash flow model that assumes a WACC of 10.0% and a terminal growth rate of 4.0%; the equity comparison benchmark is the CSI300 Index. The report also notes that the stock currently trades at 26.2 times FY26F fully diluted EPS of CNY0.79. Nomura's decision to maintain its rating and target price despite weaker results is based primarily on management's continued commitment to its full-year growth and margin guidance, rather than a valuation adjustment in response to short-term performance pressure.

Analysis framework

The report first derives standalone 2Q26 revenue and earnings from the disclosed 1H26 data, then breaks down the sources of revenue growth and the reasons for the earnings decline. It subsequently assesses the FY26E guidance using the ultrasound and endoscopy growth assumptions provided by management during the conference call, and finally determines the target price using a DCF model while presenting the current valuation level based on FY26F fully diluted EPS.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF target price model

  The report discounts the company's future cash flows to present value, using a WACC of 10.0% as the discount rate and 4.0% as the terminal growth rate, resulting in a target price of CNY34.11.

• (Out-of-vocabulary Method)

  Deriving standalone quarterly performance from half-year results

  The report derives standalone 2Q26 data from cumulative 1H26 results and uses it to assess quarterly revenue growth, earnings changes, and their underlying business drivers.

• Valuation MethodPE/PEG valuation

  Forward P/E valuation reference

  Based on FY26F fully diluted EPS of CNY0.79, the report notes that the stock currently trades at 26.2 times earnings, providing a valuation reference in addition to the DCF-based target price.

Asset mapping & comparison

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

• Sonoscape Medical (300633CH)

  The medical device company directly covered by the report; overseas endoscopy and new businesses drove revenue growth, but domestic tender prices and margin pressure weighed on earnings.

  Strengths

  Overseas endoscopy sales accelerated, with 2Q26 growth exceeding 50% YoY based on Nomura's estimates, while new-business sales continued to ramp up; management maintained its FY26E growth and margin guidance.

  Weaknesses

  Domestic ultrasound and endoscopy sales were weaker than expected due to lower tender prices, while 2Q26 gross margin, other income, and expenses collectively depressed net profit.

  Comparison

  The report uses the CSI300 Index as the comparison benchmark for its stock rating but does not provide a comparison with peer companies.

  Risks

  A weaker-than-expected recovery in hospital procurement or a longer-than-expected destocking period.

Key data

• 1H26 RevenueCNY1.05bnUp 9.2% YoY
• 1H26 Net ProfitCNY14mnDown 70.7% YoY, mainly dragged down by negative foreign-exchange effects
• 2Q26 RevenueCNY573mnEstimated by Nomura to be up 7.2% YoY
• 2Q26 Net ProfitCNY25mnDown 34.8% YoY
• Overseas Endoscopy Sales GrowthMore than 50% YoY growthNomura's estimate for 2Q26
• FY26E Revenue Growth GuidanceApproximately 15% YoY growthReiterated by management
• FY26E Ultrasound Sales Growth AssumptionHigh-single-digit YoY growthOne of the business assumptions underlying management's full-year revenue guidance
• FY26E Endoscopy Sales Growth Assumption15% to 20% YoY growthOne of the business assumptions underlying management's full-year revenue guidance
• FY26E Net Profit Margin Guidance15%Maintained unchanged by management
• DCF Target PriceCNY34.11Maintained unchanged; WACC assumption of 10.0% and terminal growth rate assumption of 4.0%
• FY26F Fully Diluted EPSCNY0.79Current share price corresponds to a P/E ratio of 26.2 times
• Closing PriceCNY20.69August 21, 2026

Impact & implications

The report believes that rapid growth in overseas endoscopy and the ramp-up of new businesses support revenue, but lower domestic tender prices and pressure from gross margin, other income, and expenses weakened earnings performance. Achieving approximately 15% FY26E revenue growth and a 15% net profit margin will depend primarily on the realization of the ultrasound and endoscopy sales assumptions and a recovery in profitability. Nomura has not adjusted its Buy rating or target price in response to the 2Q26 earnings decline.

Risks

• A weaker-than-expected recovery in hospital procurement could hinder achievement of the target price.
• A longer-than-expected destocking period could hinder achievement of the target price.