China Securities has released a research note indicating that the medical device sector maintained its revenue growth trajectory in Q2, with quarterly profit growth turning positive for the first time in four years. Within the sector, high-value consumables faced growth pressure due to multiple policy and demand factors, leading to divergent performance among companies; medical equipment saw improved year-on-year revenue growth compared to Q1, though profits remained impacted by volume-based procurement price cuts and currency fluctuations; the IVD segment achieved its first quarter of positive revenue growth in two years, with policy headwinds gradually clearing and the domestic market potentially poised for a turning point; other device sub-sectors were significantly influenced by price increases for disposable gloves. The medical services sector posted positive revenue growth in H1, with profit declines primarily attributed to one-off tax effects at leading companies.
The research firm's key perspectives highlight that the medical device sector has now delivered four consecutive quarters of positive revenue growth and achieved its first quarter of positive net profit growth attributable to shareholders in four years, demonstrating a solid industry recovery trend. The medical device sector's H1 2026 revenue, net profit attributable to shareholders, and net profit attributable to shareholders excluding non-recurring items grew 7.08%, 11.98%, and 20.32% year-on-year respectively. In Q2 2026, the sector's revenue, net profit attributable to shareholders, and net profit excluding non-recurring items grew 10.73%, 40.10%, and 46.32% year-on-year respectively. Since Q3 2025, the sector has recorded four consecutive quarters of positive revenue growth with an accelerating trend, and on the profit side, this marks the first quarterly positive growth in net profit attributable to shareholders in four years.
Looking at specific sub-sectors: The high-value consumables segment faced operational pressure in Q2 2026 due to the combined impact of volume-based procurement policies, domestic demand weakness, enhanced medical compliance requirements, and currency fluctuations. Revenue maintained positive growth, but net profit attributable to shareholders and net profit excluding non-recurring items declined. In the medical equipment segment, despite weak bidding demand in the domestic market, Q2 revenue grew over 10%, slightly faster than Q1, supported by a relatively low base in the year-ago period and gains in domestic market share at some companies alongside strong overseas growth. However, profit margins continued their Q1 decline due to lower gross margins at certain companies caused by procurement policies and shifts in product mix, compounded by currency fluctuations and sustained high growth in expense investments. The IVD segment achieved its first positive revenue growth in two years during Q2 2026, with substantial profit growth. This was driven partly by a low base in Q2 2025 resulting from multiple policy impacts including procurement execution, testing package unbundling, and medical service price adjustments, and partly by intensified overseas expansion efforts at certain IVD companies, making international business a key growth driver for the segment. In other device sub-sectors, Blue Sail Medical, Intco Medical, and Zhonghong Medical benefited significantly from sharp price increases in gloves, substantially boosting profits; Joincare Medical Group's forward-looking investments in innovative ventures through participation in domestic venture capital funds and direct investments led to a large increase in fair value gains in Q2 2026, contributing to growth in the household medical device segment.
The firm believes that as the impact of procurement policies gradually clears, combined with innovation-driven growth and accelerated overseas expansion, the medical device sector's performance is expected to steadily improve. The sharp profit decline in the industry during 2025 was likely attributable to multiple factors including IVD procurement policies, medical service price adjustments, and one-time impairment provisions and currency exchange losses at certain low-value consumables companies. The margin of decline in net profit attributable to shareholders narrowed in Q1 2026, and the industry's overall quarterly profit growth turned positive in Q2. Looking ahead, as the impact of consumables procurement continues to dissipate, commercial realization of innovative products materializes, and domestic companies accelerate overseas business development, the medical device industry's performance is expected to gradually improve. While quarterly growth rates may experience fluctuations and it remains uncertain whether Q3 can accelerate further relative to Q2, the broader trend suggests a high degree of certainty for continued year-over-year performance improvement in both 2026 and 2027.
In medical services, the sector posted positive revenue growth in H1 2026, with the profit decline primarily stemming from one-off tax effects at leading companies. Q2 2026 saw sector revenue, net profit attributable to shareholders, and net profit excluding non-recurring items grow 1.16%, -47.07%, and -46.75% year-on-year respectively, while H1 2026 figures were 1.68%, -14.89%, and -14.78% respectively. The significant year-on-year profit decline in Q2 was mainly due to the substantial scale of leading company Aier Eye Hospital Group, which incurred one-time impacts from supplementary tax payments and late fees during the quarter. On the revenue side, the sector maintained positive growth in Q2, though the growth rate moderated compared to Q1 despite a relatively low base for ophthalmology service companies in Q2 2025, indicating persistent consumer environment pressures.
Ophthalmology leaders continue to gain market share. Given that ophthalmology service companies account for a significant portion of the sector's revenue, the firm analyzed key financial metrics of listed ophthalmic companies. Since 2024, revenue growth in the ophthalmology service industry has slowed, with gross margins declining year-on-year due to intensifying competition, volume-based procurement of cataract intraocular lenses, and medical insurance payment reforms. However, national ophthalmology chains including Aier, Huaxia, and Bright Eye Hospital have maintained revenue growth despite the industry downturn, with industry concentration continuing to rise. Even excluding the impact of mergers and acquisitions by these three companies, organic revenue growth from 2024 to Q2 2026 is expected to remain positive, highlighting the critical importance of brand strength and operational capabilities for hospitals.
Risk factors include industry policy risks, R&D progress falling short of expectations, approval processes exceeding expectations, and macro environment volatility.
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