A solid 2025; 1Q26 revenue slightly ahead of expectations. In 2025, Micro- Tech reported revenue of RMB3.2bn (+15.5% YoY) and attributable net profit of RMB570mn (+3.1% YoY). Its 1Q26 revenue grew 22.1% YoY to RMB854mn, slightly beating our expectations and accounted for 24% of our full-year forecast (vs. the historical average of 21%). Attributable net profit declined 9.0% YoY to RMB146mn primarily dragged by FX losses. Given the strong growth of overseas business and potential recovery of domestic business, we raise our 2026 full-year revenue growth estimates from 11.4% to 15.9%.

Overseas business remained the primary growth engine. In 2025, overseas revenue increased 40.9% YoY to RMB1.9bn. Excluding the RMB267mn contribution from subsidiary CME, organic overseas growth remained solid at ~21%. This strong momentum persisted in 1Q26, with overseas revenue up 28.2% YoY, lifting its revenue contribution from 60% in 2025 to 61% in 1Q26. We believe the acquisition of CME and CONMED’s (CNMD US, NR) GI endoscopic consumable product lines will significantly enhance Micro-Tech’s direct sales footprint in US and European markets. We continue to view the direct sales capability as a critical competitive moat for its rapid overseas growth. Additionally, the January 2026 launch of the Thailand manufacturing center should further enhance its global delivery efficiency and supply chain resilience.

Domestic market showed signs of recovery. While 2025 domestic revenue declined 9.6% YoY to RMB1.25bn due to the VBPs, 1Q26 domestic revenue recovered with a 13.6% YoY growth. Notably, domestic sales of GI products grew ~25% YoY in 1Q26. Despite the ongoing VBPs in Guangdong and Zhejiang provinces, we believe the marginal policy impact is weakening, driven by the rapid growth of innovative products. In our view, Micro-Tech’s domestic business has shown signs of bottoming out.

Innovative products contributed meaningful incremental growth. Revenue from innovative products (including visualization business) grew over 40% YoY in 2025, accounting for 8% of total revenue. In 1Q26, revenue from innovative products increased 65% YoY, expanding their revenue share to 10.6%. With domestic channel inventory for single-use endoscopes largely digested and strong global growth, we expect visualization business to maintain robust momentum in 2026E. Overall, we see the continued ramp of the innovation portfolio and overseas expansion as effective offsets to domestic VBP pressure.

Maintain BUY. Given the slight 1Q26 revenue growth beat, we raise our 2026E–2028E revenue forecasts. Accordingly, we raise our target price to RMB97.38 based on a 10-year DCF model (WACC: 10.7%, terminal growth: 2.0%; both unchanged).