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On April 25, 2023, the company announced its 2022 annual results. During the reporting period, the company achieved operating income of 10.494 billion yuan (+18.45%), net profit attributable to shareholders of listed companies of 418 million yuan (+9.87%), and an average earnings of 0.72 yuan per share. Among them, the 2022 Q4 company achieved revenue of 2.86 billion yuan (+28.82%); achieved net profit of 112 million yuan (+91%) to the mother, with a gross profit margin of 27.99%. The performance slightly exceeded our expectations. 2023Q1 achieved operating income of 2,178 million yuan (+0.44%), achieved net profit of 81.04 million yuan (+96.09%), and achieved net profit of 72.31 million yuan (+94.56%) after deducting non-return to the mother.

Incident reviews

The epidemic affected testing volume. The second half of 2022 and 23Q1 recovered rapidly. The platform scale cost advantage was significant. The first half of 2022 was affected by the epidemic. The company's main in-hospital routine testing service business was restricted to a certain extent. Beginning in the second half of '22, the order of in-hospital visits was gradually restored, and the company's business improved marginal. Splitting the revenue structure, the company's commercial sector achieved revenue of 10.03 billion yuan (+19.77%) in 2022, of which the intensive business/regional inspection center business achieved revenue of 2,666 billion yuan (+6.01%), of which revenue was 1,470 billion yuan (+10.68%) in the second half of the year; the traditional agency business achieved revenue of 5.985 billion yuan (+9.14%). In 2022, the company's industrial sector achieved revenue of 485 million yuan (-3.42%). The company's related business entities were mainly located in Shanghai. The first half of the year was affected by objective factors and production was stopped. The third-party laboratory business achieved revenue of 1,352 billion yuan (+282.88%) in 2022, mainly due to the increase in the company's nucleic acid revenue during the reporting period.

There was a significant increase on the profit side of 2023Q1, mainly due to the good repayment of the company's operating cash flow during the reporting period, and the significant year-on-year decline in credit impairment losses.

The company's overall gross profit margin for the full year of '22 was 27.99%, up 2.84 pct year on year; sales expense ratio was 9.88%, up 0.34 pct year on year; management expense ratio was 5.16%, up 0.67 pct year on year; R&D expense ratio was 1.39%, up 0.01 pct year on year; financial expense ratio was 3.08%, down 0.21 pct year on year. Net cash flow from operating activities was -429 million yuan, mainly due to a large increase in third-party laboratory business. Some of the related business payments were not repaid. At the same time, hospital customers were affected by objective factors, and the repayment cycle was extended, causing the company's net operating cash flow during the reporting period to be negative.

The customer structure continues to be optimized, and LDT's business has become a large-scale effect

The number of partner hospital customers of the company is large, with an inventory of 4,000, and a net addition of 29 intensive district inspection center customers in 2022, with a total of 420 during the reporting period. The strength of the company's service team continues to grow, with more than 900 employees responsible for providing a series of value-added services to hospital customers (600+ technical and information service teams of professional engineers, 300+ on-site service personnel).

There is full coverage of mainstream suppliers and products in the industry. At the same time, the industrial sector is accelerating the deployment of the company and continuing to enrich the in vitro diagnostic product matrix, covering nearly 19,000 products related to in vitro diagnosis provided by nearly 1,200 different manufacturers. Furthermore, during the reporting period, the company's new generation of glycated hemoglobin analyzer MQ-8000 was officially launched and promoted. The mass spectrometer developed the unique patented technology “Spectrometer Fast” liquid extraction trabecular column and the “Spectrofangda” fully automated processing system and an innovative clinical mass spectrometer, which further strengthened its leading market position in domestic products.

Investment advice: Maintaining a “buy” rating

Runda Medical is a leading laboratory strategic partner in the country. Through years of deep involvement in IVD supply chain services and comprehensive laboratory services, it has systematic independent product development capabilities, systematic IT development service capabilities, and a complete engineer service team system, and continues to be recognized by customers. In the future, the company will use information technology such as big data, cloud computing, artificial intelligence, etc. to empower traditional testing services to upgrade in the direction of refinement, informatization, and intelligence to help hospital customers further reduce costs and increase efficiency, thus building Runda's deep moat. We are optimistic about the strategic positioning and scarce capabilities of the company's hospital laboratory partners. We expect the company to achieve revenue of 123.42/146.84/17.273 billion yuan from 2023 to 2025, +17.6%/19.0%/17.6% year on year; achieve net profit of 504/616/745 million yuan compared to the previous year, +20.6%/22.2%/20.9% year on year; corresponding to P/E15/12/10x.

Risk warning

The promotion of the intensive model fell short of expectations; the promotion of industrial lines fell short of expectations; the integration of modules fell short of expectations; the operation of joint ventures fell short of expected risks.