Incident: On the evening of August 24, 2023, the company released its 2023 semi-annual report. 2023H1 revenue was 295 million yuan (+0.45%, same in parentheses, same below), net profit of 31.83 million yuan (-80.72%), net profit of non-attributable income of 19.34 million yuan (-81.16%). 2023Q2 had revenue of 163 million yuan (+6.59%), net profit of 19.47 million yuan (-81.31%), net profit of non-return of 13.35 million yuan (-71.25%).

Short-term performance was under pressure, and Q2 accelerated month-on-month: excluding revenue from magnetic beads used for nucleic acid testing in 2022, 2023H1 revenue increased 14.04% year on year, and single Q2 increased by about 22.1% year on year; if 2023H1 spectrum instruments and consolidated revenue were excluded on this basis, 2023H1 and 2023Q2 revenue increased 2.2%/11.3% year on year, respectively. After excluding the amortization of share payments and the impact of the investment income of the Spectrum instrument, the net profit of 2023H1 was 93.87 million yuan (-25.5%), after deducting non-attributable net profit of 81.38 million yuan (-29.31%). After excluding share payments, the company's 2023H1 sales/management/R&D expenses increased by 29.8%/26.4%/69.6%, respectively. Under downward pressure from demand, the company's revenue growth rate slowed but expenses were still high. Combined with losses from subsidiaries such as Spectrometer, etc., the company's net profit declined year-on-year. On a month-on-month basis, the company's revenue in 2023Q2 increased 23.41% month-on-month. Among them, revenue from chromatographic fillers and chromatographic media products increased by 31.5% month-on-month, and the recovery momentum is good. In terms of profitability, the company's gross profit margin of 2023H1 was 79.06% (-2.15pct), mainly due to changes in product structure after merging spectrum instruments. Looking at chromatographic fillers and chromatography media, the gross margin of chromatographic fillers and chromatography media alone was 85.7% (+0.62 pct). In a market environment where competition is becoming fierce, the company's gross margin of fillers has steadily increased, reflecting the company's strong product competitiveness.

The project funnel continues to be enriched, and we are optimistic about the company's long-term growth: 2023H1's chromatographic fillers and chromatography media sales revenue was 211 million yuan (+5.45%), accounting for 71.5% of revenue (+3.51 pct); filler revenue used in formal production or phase III clinical projects of pharmaceutical companies was 104 million yuan, accounting for 49.15% (+8.10 pct) of filler and media product revenue. By sector, 2023H1 sales revenue for products such as media and biological isolation columns used in macromolecular drugs was 141 million yuan (+6.73%). The customer base continues to expand, and small molecule drug-related revenue is 58 million yuan (-9.92%). Due to the long service life of small molecule fillers, there was a decline under the high base in 2022. By project, the company added 630 new project applications for 2023H1 fillers, including 9 new Phase III/commercialization projects applied to the antibody field, further enriching the project funnel. Furthermore, the company maintains a high level of R&D investment under external pressure, and is expected to launch a new generation of hybrid silicones (boosting insulin, peptides, etc.) and a new ProteinA affinity chromatography medium with higher alkali resistance in the second half of 2023. At the same time, as the company's production capacity is put into production and collaborative catalysis after the acquisition of Fuli Instruments is gradually realized, performance is expected to recover further. As a leading domestic filler, Nanowei Technology has strong product competitiveness. We are optimistic about the company's long-term growth.

Profit forecast and investment rating: We adjusted the company's 2023-2024 revenue from 1,068/1,567 million yuan to 760/1,153 million yuan, estimated 2025 revenue of 1,355 million yuan, and net return profit from 409/611 million yuan to 180/266 million yuan. We expect net profit from 2025 to 387 million yuan. The current share price corresponding to PE is 75/51/35 ×. We are optimistic about the growth of domestic filler leaders and maintain the “buy” rating.

Risk warning: increased market competition; downstream demand declining; market development falling short of expectations, etc.