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iRay has been engaged in detectors for more than a decade, and its market share of digital X-ray detectors was ranked third in the world and first in China in 2021. The Company has entered deep cooperation with many imaging equipment leaders in the world, leveraging the supply chain dividends in China and the mastery of the core technologies of the four major sensors, and has been leading the shift of the global X-ray detector value chain to China. We anticipate that iRay’s dental and industrial components will drive up earnings in the short term, alongside the continuous category expansion in the medium term and the strategic upgrades driven by one-stop supply chain solutions in the long run, which will help iRay launch a new journey as a core component solution supplier along the imaging equipment chain, and create future growth upside. iRay stands well to fully benefit from the triple driver of industry growth, import substitution and product category expansion. We assign 65x 2022E PE to derive a target price of Rmb580 and initiate coverage with a "BUY" rating.　　A promising player along the global imaging equipment chain. iRay is one of the few manufacturers in the world that masters the four sensor technologies of amorphous silicon, indium gallium zinc oxide （IGZO）， complementary metallic oxide silicon （CMOS） and flexible substrates with mass production capabilities. Its products have been exported to more than 70 countries and regions around the world. In 2021, iRay’s global shipment reached more than 50k units, with a wide customer coverage, including domestic and overseas well-known imaging equipment manufacturers and industrial inspection leaders, and its market share was ranked third in the world and first in China. Its revenue/attributable net profit （ANP） recorded a 2017-2021 CAGR of 35%/73%, respectively. We expect that with the market share expansion of iRay"s flat panel detectors and the upgrades and expansion of categories, it will accelerate to overtake international competitors and develop into a leading supplier of one-step imaging equipment solutions in the global market with high growth visibility going forward.　　iRay benefits from the upgrading of the imaging equipment value chain with deepened import substitution.　　Digital flat panel detectors, the core components of X-ray imaging equipment, are in the midstream of the industry, with application covering medical and industrial fields. According to iRay"s IPO prospectus, Yole predicts that the global digital X-ray detector market will reach US$2.45bn in 2024, and the strong demand on the application side will create secular upside. In the medical field, the static cost-oriented market and dynamic demand upgrade will add to growth momentum. In the industrial field, power battery semiconductors achieved breakthroughs on multiple fronts, making space for multi-dimensional growth. The high barriers to flat-panel detector technology promote concentrated industry pattern. Local manufacturers represented by iRay are gradually leading the shift of the global digital X-detector value chain to China on the back of technological and cost advantages.　　Short-term: Dental and industrial components bring high earnings　　growth, alongside the sustained deepening of import substitution.　　The rising demand for high-margin dental and industrial components will bring high earnings growth visibility to iRay in the short term （we expect the revenue of its dental and industrial components to maintain a CAGR of 43% over 2022E-2024E）， and the revenue contribution of dynamic products will rise further. The mutual reinforcement of the Company"s price strategy and sector trends has been changing the competitive landscape. Moving forward, the market share expansion logic of actively lowering prices for a larger quantity will gradually shift from upstream to downstream, alongside the sustained deepening of import substitution.　　Medium-term: Deep cooperation with domestic and overseas customers and continue category expansion refuel the growth. iRay has mastered the core underlying technologies and launched an accelerated expansion in application areas based on the cumulative needs from strategic key clients. On Jan 14, 2022, it announced a planned issuance of convertible bonds to raise no more than Rmb1.435bn for new detectors, scintillation material industrialization projects and the key technology R&D of digital X-ray detectors, and achieved continuous category expansion by following the clear growth path of carrying on the exploration in CMOS and high-end medical dynamic detectors, as well as industrial and computed tomography （CT） linear array detectors. According to the economic analysis of its convertible bond prospectus, we expect iRay to record an annual incremental revenue of about Rmb1.5bn, launching the second growth curve.　　Long-term: Strategic upgrades kick-start a new journey as a solution provider along the imaging equipment chain. iRay has been proactively upgrading its strategies and has gained a foothold in upstream core components and links. It continues to develop new products and venture into new fields with an endeavor to become a product development and solution provider along the imaging equipment chain, leveraging its strong R&D capabilities that has been verified continuously. It consolidates its existing customer base with technological innovation and iterative products, makes space for incremental markets via application expansion, and provides one-stop solutions for downstream customers, creating future growth upside to start a new journey of secular development.　　Potential risk: Falling product prices; supply interruption of some raw materials; the development of new technologies and products; the fluctuations or even decline of gross profit margin （GPM）； the progress of the convertible bond project and the projects funded by IPO proceeds failing expectations.　　Investment recommendation: As a domestic leader, iRay’s market share of digital X-ray detectors was ranked third in the global market. It has entered deep cooperation with domestic and foreign top customers on the back of its good value-for-money, bringing the high cost performance of products to the fore. We expect it to fully benefit from the triple driver of industry growth, import substitution and product category expansion. We selected NovelBeam （688677.SH）， the leader in the core components of fluorescent endoscopes also with three advantages, and United Imaging Healthcare （688271.SH）， the imaging equipment leader for iRay’s downstream customers, as comparable companies. The average comps valuation for 2022E-2024E is 77x/58x/46x PE based on Wind consensus estimates. Compared with comparable companies, iRay"s downstream customers cover many leading OEM/ODM service providers　　around the world, enabling it to fully enjoy the industry development dividends.　　We expect that the Company"s dental and industrial security segments will contribute to the growth momentum in the short term, alongside the continuous category expansion in the medium term and the strategic upgrades in the long run. We forecast iRay"s 2022-2024 revenue to be Rmb1.62bn/2.11bn/2.69bn （+36.3%/30.6%/27.4% YoY）， with ANP of Rmb0.65bn/0.87bn/1.14bn （+33.8%/34.0%/30.9% YoY）， equivalent to EPS forecasts of Rmb8.93/11.96/15.66, and PE of 55x/41x/31x at the current price.　　With the average comps valuation of 76x 2022E PE for United Imaging Healthcare （688271.SH） and NovelBeam （688677.SH） as a reference, we assign 65x 2022E PE to derive a reasonable market cap of about Rmb42.1bn and a target price of Rmb580. We initiate coverage with a “BUY” rating.【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

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