The potential market space for the joint construction business is huge, which will drive rapid revenue growth over a long period of time; as the prices of various types of tests stabilize, profit margins are also expected to rise steadily after the 1H22 fluctuation. We maintained the “buy” rating for the company's stock and raised the target price to HK$23.0.

The company's 1H22 revenue and net profit attributable to the parent increased 82% and 50% year-on-year respectively to $1.38 billion and $234 million, with an interim dividend of HK$0.088 per share (payout rate of 17%). We adjusted the 2022/23/24E revenue forecast to +24%/+10%/-0.3% respectively. The main reasons were: 1) the domestic epidemic rebounded to a large extent in 2022, and we expect future epidemic prevention measures to be relatively strict, so we raised the 2022-24E COVID-19 testing-related revenue forecast; 2) Strict epidemic prevention measures will have a potential negative impact on the operation of individual customer hospitals, so the 2022-24E non-COVID-19 testing revenue was lowered by 13%/3%/3%. We also lowered the 2022-24E gross margin by 0.3-2.9pcts to reflect the pressure on COVID-19 testing prices. In the end, the net profit forecast for the mother was adjusted +7.8%/+5.0%/-0.9%, respectively. We gave the company's non-COVID-19 business a 27x target PE valuation multiple (consistent with the previous one), and continued to use DCF to value the company's COVID-19 business. In the end, we arrived at a new target price of HK$23.0, corresponding to 19x 2023E PE and a potential stock price increase of 22%.