The income in the first half of 2002 was 98 million yuan, which was the same as that in the same period last year, mainly due to COVID-19 's price reduction and epidemic disturbance.

Cancer screening revenue increased by 30% in the first half of 2002 compared with the same period last year; we predict that the business will continue to grow rapidly in fiscal year 23, with a compound annual growth rate of 105% in 2021-23.

We lowered our target price to HK $19.5 on the basis of a reduction in our profit forecast for 22am 23. Be optimistic about the rapid growth of the company's cancer screening business, maintain the holding rating, and the income growth in the first half of 22 years is under pressure due to the epidemic.

The total revenue in the first half of 22 was 98 million yuan, the same as that in the same period last year, with different business sectors performing differently. Revenue from cancer screening rose 30 per cent year-on-year to 52 million yuan, mainly due to a continued increase in market penetration driven by strong demand. Revenue from consumer-grade genetic testing fell 20 per cent year-on-year to 46 million yuan, mainly due to the price reduction of COVID-19 testing services and the disturbance of the epidemic (revenue fell 13 per cent in the first half of 22). The overall gross profit margin remained relatively stable at 66% in the first half of 22 (compared with 66.5% in the first half of 21). However, we noticed that there were differences in gross profit margin between business sectors in the first half of 22 years: 1) the gross profit margin of consumer genetic testing business decreased from 60.2% to 51.8%, mainly due to the impact of the epidemic and COVID-19 testing price reduction (Beijing mixed mining price has dropped from about 8 yuan per person to about 3.4 yuan per person (link) since the beginning of the year) 2) the gross profit margin of cancer screening business increased by 3 percentage points to 78.5%, mainly due to the continuous improvement of operational efficiency. In the first half of 22, the rate of sales management expenses (excluding one-time listing-related fees) rose from about 18% to about 31%. This is mainly due to the company's expansion of the size of the sales force (an increase of 114% in the number of marketing personnel) and increased investment in research and development (costs increased by 110% over the same period last year). As a result, the company's adjusted net profit fell 24% year-on-year.

The increase in revenue from cancer screening is worth looking forward to.

Based on the strong performance of the cancer screening business in the first half of 22 years, we expect the sector to continue to maintain rapid growth in the second half of 22 years. At present, the company has covered more than 1570 customers (including about 600 Mei Nian medical examination centers) in more than 340 cities across the country. We expect the company to cover about 1800 medical customers by the end of 22 (up 20 per cent year-on-year), mainly due to the expansion of its sales force. We predict that the company's cancer screening business revenue will grow to 422 million yuan in 2021-23, with a compound annual growth rate of 105%.

Maintain the overweight rating and adjust the target price based on the price-to-earnings ratio to HK $19.5. We have lowered our adjusted net profit forecast for fiscal year 22 by 8% and 6% respectively to reflect revenue growth and lower-than-expected gross profit margin in the first half of 22. We have lowered our target price based on the price-to-earnings ratio from HK $23.1 to HK $19.5, based on a price-to-earnings ratio of 17 times 2023 (close to the 2023 average price-to-earnings ratio of its listed peers). Investment risk: contract renewal and regulatory risk.