Incident: The company released its semi-annual results forecast for 2023. 23H1 achieved net profit of 236—252 million yuan, an increase of 45% -55% over the previous year; net profit of 234-250 million yuan, a year-on-year increase of 50.06%-60.52%, the performance performance exceeded market expectations.

Comment:

Medical institutions across the country resumed normal operation, and the company's 23Q2 performance increased sharply year on year: the company's net profit corresponding to 23Q2 was 1.25-141 million yuan, up 93.25%-118.41% year on year. The rate of recoverable growth in net profit from Homo is accelerating. With the resumption of normal operation of medical institutions across the country in 2023, the company's business has returned to normal levels, achieving sales revenue and profit growth in several categories of products: biochemical immunity, blood clotting, blood type, pathological diagnosis, and accurate diagnosis. The estimated non-recurring profit and loss for the half year of 2023 is 2.3334 million yuan, a decrease from 7.05006 million yuan in the same period last year, mainly due to government subsidies. The increase in the company's net profit after the epidemic mainly depends on the restorative growth of the company's business.

R&D capabilities continue to increase, and product range continues to be enriched: in vitro diagnosis is a technology-intensive industry, and the company has long focused on expanding its leading edge in the industry through product development. In 23Q1, the company invested 362.21,000 yuan in R&D. In the second quarter of 2023, the company obtained invention patent certificates including a confirmation reagent for lupus anticoagulants and its preparation method, a screening reagent for lupus anticoagulants and their preparation method, a glucose 6-phosphate dehydrogenase mutant and its use in preparing phenytoin detection reagents, and a kit for detecting soluble growth hormone expression gene 2 protein, which marks an increase in the company's R&D capabilities. In the second quarter of 2023, many of the company's products, such as the human epiditesticular protein 4 test kit (latex immunoturbidimetry), the protein C test kit (hair color substrate method), and the direct bilirubin test kit (bilirubin oxidase method), obtained medical device registration certificates one after another, further enriching the company's product lineup.

Sinopharm's shareholding ratio continues to increase, helping the company accelerate its growth: in 2020, Sinopharm Investment became the company's largest shareholder. As of June 27, 2023, Sinopharm Investment's shareholding ratio reached 16.67%, and the increase in holdings in the secondary market continued. Sinopharm Investment is a wholly-owned subsidiary of Sinopharm Group. In the future, the company will continue to make full use of channel synergies with Sinopharm Group and maintain the advantages of merger and acquisition cooperation with Sinopharm Investment to accelerate the company's growth.

Profit prediction, valuation and rating: We expect the company to continue to benefit from post-epidemic recovery and is optimistic about Sinopharm's continued support. We maintain the company's net profit forecast for 2023-2025 at 522/673/834 million yuan. The current price corresponds to 25/19/15 times PE in 23-25, maintaining the company's “buy” rating.

Risk warning: Risk of price reduction exceeding expectations, risk of changes in sales models, risk of new product development and listing progress falling short of expectations, and risk of stock price instability due to irregularities.