Sinolink Securities Co., Ltd. has released a research report highlighting the dual investment themes of "innovation" and "global expansion" in the medical device sector. The industry is currently experiencing a dual opportunity of "fundamental recovery" and "valuation system restructuring." The investment rationale has shifted from simple domestic substitution to two core directions: "innovation" and "global expansion" with international competitiveness. As the impact of domestic volume-based procurement diminishes marginally, companies with strong innovation capabilities and internationalization potential are being revalued by capital. The report recommends focusing on leading sub-sector companies expected to accelerate performance by 2026. Key viewpoints from Sinolink Securities Co., Ltd. are as follows:
Medical Equipment: The sector has returned to a steady growth track, though profitability remains under significant pressure. Q4 2025 single-quarter revenue increased by 6.34% year-over-year, while Q1 2026 single-quarter revenue rose by 4.30% year-over-year. However, profitability remains challenging, partly due to exchange rate losses for some companies expanding overseas. The previous decline in gross profit margins caused by policy controls and price adjustments has halted, and future profit growth is expected to gradually recover.
Medical Consumables: Revenue growth is gradually recovering, with slight improvements in gross profit margins. Q4 2025 single-quarter revenue increased by 4.78% year-over-year, while Q1 2026 single-quarter revenue grew by 6.84% year-over-year, indicating a halt in the previous downward trend. The impact of product price reductions from DRG and volume-based procurement is gradually fading, and the operation of overseas production bases is creating new export opportunities. The sector's gross profit margin was 41.70% in Q4 2025, up 1.69 percentage points year-over-year, and reached 42.72% in Q1 2026, up 1.26 percentage points year-over-year. Profit declines are mainly attributed to factors such as exchange rate losses.
In Vitro Diagnostics: The decline trend has moderated, awaiting the full impact of domestic policies. Q4 2025 single-quarter revenue decreased by 2.78% year-over-year, while Q1 2026 single-quarter revenue fell by 6.51% year-over-year, showing some moderation compared to previous declines. Domestic diagnostic demand has been significantly affected by the implementation of DRG in recent years, and measures such as mutual recognition of hospital test results across regions have further impacted testing demand, putting short-term industry demand under pressure. However, in the long term, these factors are expected to drive the domestic localization rate higher, while overseas market expansion may support sustained growth momentum for companies.
Risk warnings include exchange rate risks, volatility in domestic and international policies, fluctuations in investment and financing cycles, and risks associated with mergers and acquisitions falling short of expectations.