Incident: The company issued a semi-annual report for 2023. In the first half of 2023, it achieved revenue of about 300 million yuan (+0.5% compared to the same period), net profit of 31.828 million yuan (-80.7% YoY), net profit of 19.342 million yuan (-81.2% YoY) after deducting net profit not attributable to the parent group. Q2 alone achieved revenue of 160 million yuan (+6.6% YoY), net profit of 0.2 billion yuan (-81.3% YoY), net profit of non-attributable income of 0.1 million yuan (-71.2% YoY).

Performance is under pressure in the short term, and there is room for long-term growth: (1) Looking at the revenue side: excluding the impact of revenue from magnetic bead products used for nucleic acid testing, 23H1's revenue increased by about 14.0% year on year. The external environment at the beginning of '23 was unfavorable. 23Q1/Q2 achieved revenue of 130 million yuan/160 million yuan, and Q2 achieved revenue of about 23.4% month-on-month. Among them, revenue from chromatographic fillers and chromatography media products increased 31.5% month-on-month. The overall recovery momentum is good. (2) Looking at the profit side: After excluding the influence of two factors, such as amortization of share payments and investment income from the acquisition of Spectrum Instruments in the same period in '22, the net profit attributable to 23H1 was 93.867 million yuan (YoY- 25.5%), and realized net profit of 81.381 million yuan (-29.3% YoY) after deducting non-attributable net profit.

The gross margin of 2023H1 was 79.1%, a year-on-year decrease of 2.15%, mainly due to changes in the product structure after the company merged Spectrometer (23H1 Spectrometer's revenue was 305.57 million yuan, an increase of 15.974 million yuan over the previous year).

Focus on the biomedical industry and continue to accumulate application project scale: 23H1 The biomedical sector achieved revenue of 270 million yuan, an increase of 12.09% over the same period last year. Among them, sales revenue of chromatographic fillers and chromatographic media products was 211 million yuan, up 5.45% over the same period last year. Filler products accounted for 71.5% of total revenue. The number of customers that sold chromatographic fillers and chromatographic media products in the first half of the year was 397, an increase of 9 over the same period last year. (1) In terms of application areas, sales revenue of chromatographic fillers and chromatographic media products used in pharmaceutical companies' official production or phase III clinical projects was about 104 million yuan (accounting for 49.2% of filler and media revenue), an increase of 8.1% over the previous year; sales revenue of affinity and ion exchange chromatography media used in the separation and purification of macromolecular drugs was 141 million yuan, an increase of 6.7% over the previous year; sales revenue of polymers and silicone chromatographic fillers used in the separation and purification of small molecule drugs was 58 million yuan, a year-on-year decrease of 9.9%.

(2) In terms of the number of projects, 2023H1's chromatographic fillers and chromatography media have been applied to about 630 projects in the fields of antibodies, vaccines, etc., accounting for about 22% of the company's total application project statistics. Among them, the number of antibody, vaccine, and polypeptide/oligonucleotide projects was the highest, with 130, 142, and 188, respectively, 12 clinical phase III projects, and 3 commercial projects.

Profit forecasts and investment recommendations. Considering the company's semi-annual performance report, we carefully lowered the company's annual performance forecast. We expect the company's net profit for 2023-2025 to be 1.0/16/210 million yuan respectively, corresponding to the current share price PE 126/107/82 times. Considering the current low domestic production rate in the filler sector and the general trend of domestic substitution, the company can be expected to grow as a leader in domestic fillers and maintain a “increase in holdings” rating.

Risk warning: risk of increased market competition; risk of product sales falling short of expectations; risk of policies exceeding expectations.