Overseas strength offsets domestic pressure; eyes on upcoming national VBP

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 28 Aug 2026 CMB International Global Markets | Equity Research | Company Update Micro-Tech (688029 CH) Micro-Tech (688029 CH) - Overseas strength offsets domestic pressure; eyes on upcoming national VBP Overseas strength offsets domestic pressure; eyes on upcoming national VBP In 1H26, Micro-Tech reported revenue of RMB1,728mn, up 10.4% YoY. Attributable net profit decreased 16.5% YoY to RMB303mn mainly due to RMB83mn of FX losses. Excluding FX losses and related tax effects, adjusted attributable net profit rose 16.4% YoY. Given the upcoming 7th national VBP, we cut our 2026E/27E earnings estimates by 12%/7%, respectively. However, with overseas revenue accounting for over 60% of total sales, we believe strong overseas growth should help offset near-term domestic headwinds and support resilient revenue growth through 2026-27E. Notably, following the 7th National VBP, most of the Company's major products will have completed nationwide VBP, which we believe should largely clear domestic pricing risk over the next several years.  Overseas business remains the key growth engine. 1H26 overseas revenue increased 20.6% YoY to RMB1,094mn, raising its revenue contribution to 63%. Growth was broad-based across APAC, EMEA and the US, with each region growing by more than 20% YoY. Direct sales coverage continued to expand through both organic buildout and M&A, reaching 36.7% of total revenue (+4.7ppts YoY). This helped drive overseas gross margin up 1.1ppts YoY to 66.2%. In the US, hospital accounts continue to ramp and represented about 40% of total US revenue in 1H26. With the acquisition of three product lines from CONMED, we expect better access to hospital and GPO channels in the US, which may drive rapid US growth and improved profitability.  Domestic business faces near-term VBP-related pressures. Domestic revenue fell 3.6% YoY to RMB634mn in 1H26. Within this, we estimate domestic tumor intervention revenue decreased ~40% YoY due to delays in VBP implementation for tumor ablation consumables. GI revenue grew a modest 2.3% YoY to RMB556mn, reflecting proactive channel destocking after the advance VBP notice in June. We expect the national VBP to be implemented in early 2027E, suggesting domestic growth pressure could persist through 2H26E and into 2027E.  Eyes on tender outcomes of the 7th National VBP in Sep 10, 2026. The 7th National VBP, officially announced on Aug 26, covers 23 GI intervention categories. Micro-Tech obtained demand volume in 21 categories, ranking No.1 in twelve and No.2 in five. Dominant volume shares in hemostasis clips (49%) and cholangioscopes (62%) highlighted its strong market leadership. In our view, while domestic revenue and margin will come under short-term pressure, past VBP cycles suggest leading players typically gain market share. And we expect the i