Event: Recently, the company released its semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 823 million yuan, an increase of 264.58% over the previous year; achieved gross profit of 746 million yuan, an increase of 304% over the previous year; achieved net profit of 126 million yuan, and 2022H1 loss during the same period.
Product restructuring combined with optimization of production costs has led to rapid growth in profit margins. In the first half of 2023, the company's gross profit margin was 90.9%, up 8.89 pp year on year. Among them, the gross profit margin of Chang Weiqing products was 91.5%, up 15.8 pp year on year, pop tube gross profit margin was 87.2%, up 7.2 pp year on year, and Youyou tube gross profit margin was 94.2%, up 4.2 pp year on year. The sales scale of 2023H1's products continues to expand, and the share of businesses such as hospitals with high single inspection prices has increased. At the same time, combined with continuous optimization of production costs, driving a continuous increase in gross margin. 2023H1 achieved a net interest rate of 15.27% and a loss during the same period. In the first half of 2023, the company's sales expenses rate was 69.78%, down 17.52 pp from the previous year, and the management expenses rate was 24.98%, down 1.24 pp from the previous year, the financial expenses rate was 0.69%, down 0.86 pp; the R&D expenses rate was 9.09%, down 9.04 pp from the previous year. The company's expense ratio for all periods improved with the rapid increase in revenue scale.
Demand for early screening products is strong, and all three product lines have shown impressive performance. In the first half of 2023, the company continued to maintain its leading edge in the colorectal cancer and Helicobacter pylori screening markets. The sales volume and confirmed revenue of the three core varieties Chang Weiqing, Pop Tube, and Youyou Tube continued to rise, specifically. 1. Chang Weiqing: 2023H1 revenue was 491 million yuan, up 566.2% year on year, accounting for about 60% of the company's revenue, sales volume was about 538,500 copies, an increase of about 83% year on year. The company continues to accelerate the expansion of hospital channels. In particular, it has made outstanding progress in the public hospital market. In the first half of 2023, 172,000 hospital channel revenue was confirmed, making it Chang Weiqing's largest revenue source. By the end of June 2023, it had completed entry to nearly 300 public hospitals. Currently, the penetration rate of early screening for colorectal cancer in China is only 1.2%. Compared with overseas markets, there is still a lot of room for improvement. The company is expected to continue to grow rapidly in the next few years as an early mover. 2. Youyou Tube: 2023H1's revenue was about 207 million yuan, an increase of 147.40% over the previous year, and sales volume was about 2.91 million copies, an increase of about 111% over the previous year. As the only Helicobacter pylori (HP) consumer self-test device currently approved by the State Drug Administration, it has quickly become a benchmark product for consumer self-testing since its launch. The company continues to strengthen exclusive and in-depth cooperation with leading channels such as insurance, pharmacy chains, and e-commerce to accelerate product promotion. We expect it to continue its rapid growth trend in the future. 3. Pop-pop tube: 2023H1's revenue was 124 million yuan, an increase of 80.90% over the previous year, and sales volume was about 4.09 million copies, an increase of 40% over the previous year. 2023H1 has pioneered a fully automated robot production line for the IVD industry, with an annual production capacity of 30 million servings. It is used for the production of pop tubes and youyo tubes to ensure the production capacity and supply of high-performance products. We expect pop-tube products to form a strong product portfolio with Chang Weiqing products to accelerate the penetration of colorectal cancer screening.
Gong Jingqing's prospective clinical enrollment was completed, and more early screening products such as liver cancer and nasopharyngeal cancer are progressing rapidly. In the first half of 2023, the company's cervical cancer screening product, Gong Jingqing, successfully completed the baseline registration of a prospective large-scale multi-center clinical trial, with a cumulative total of more than 16,000 people enrolled. The preliminary data is highly consistent with medical cervical HPV tests. The sensitivity is similar to existing clinical invasive cervical sampling and testing methods. It is expected to become the first cervical cancer HPV screening product based on urine samples in the future; at the same time, the company's R&D work for more early screening products such as glycosides and NPCLEAR is progressing smoothly, and is expected to become an important engine for the company's rapid growth in the medium to long term .
Profit forecast and investment suggestions: According to the semi-annual report, we adjusted our profit forecast. We expect that as revenue from the company's three major products is expected to continue to grow rapidly, cost costs are expected to be quickly optimized. The company is expected to achieve operating income of 1,743, 28.10 billion yuan, and 4,058 billion yuan in 2023-2025 (1,743, 3000, 4.557 billion yuan before adjustment), an increase of 128%, 61%, and 44% over the previous year. It is expected that 2023-2025 will achieve a net profit of 227, 445 million yuan (before adjustment- 0.14, 221, 778 million yuan), with a year-on-year increase of 97% and 79% in 2024 and 2025. Consider that the company is a leading listed company for early cancer screening in China. It has a large market space, a good competitive pattern, a fast performance growth rate, good scarcity, and maintains a “buy” rating.
Risk warning events: R&D progress falls short of expectations, policy changes, potential competitors, there may be risks that information may be delayed or not updated in a timely manner in research reports, etc.