Event: according to the company's semi-annual report of 2023, the company achieved operating income of 571 million yuan in the first half of 2023, down 64.74% from the same period last year, and realized return net profit of-81 million yuan, down 113.21% from the same period last year; deducting non-return net profit of-118 million yuan, down 120.52% from the same period last year.

From a quarterly point of view, the company's operating income in the second quarter of 2023 was 269 million yuan, down 58.28% from the same period last year; the net profit was-30 million yuan, down 116.69% from the same period last year; and the non-return net profit was deducted from-43 million yuan, down 126.33% from the same period last year. The company's quarterly performance has declined, mainly affected by the high base of COVID-19 products in the same period in 2022, but also related to the company's continued efforts to strengthen channel construction and increase investment in innovation and research and development. We expect that with the rapid development of conventional business, the company is expected to continue to optimize operation and management, improve quality and efficiency, and bring increased revenue.

The scale effect weakens and the superimposed investment increases, and the profit margin fluctuates in the short term. In the first half of 2023, the company's sales expense rate was 39.77%, a year-on-year increase of 27.20 pp, a management expense rate of 20.32%, a year-on-year increase of 13.40 pp, and a R & D expense rate of 30.10%, a year-on-year increase of 20.41 pp. The expense rate increased during several periods, mainly due to the weakening of dilution effect caused by the decline of income scale. At the same time, the company continued to increase investment in domestic and foreign market development and project research and development, and the financial expense rate was-1.65%. The year-on-year decline of 1.32 pp was mainly due to increased interest income and exchange gains and losses. On the other hand, fixed cost amortization also caused some disturbance to the company's profit margin. In the first half of 2023, the company's gross profit margin was 72.29%, down 1.84pp from the same period last year, and the net profit rate was-14.36%, down 52.26 pp from the same period last year.

The life sciences sector has recovered well and the business performance such as in vitro diagnosis is outstanding. In the first half of 2023, the company focused on the existing three core sectors, promoted various businesses to get back on track, actively explored the upstream and downstream industrial chains, and made breakthroughs in consumables, equipment, quarantine and other fields. We expect the overall regular business to maintain steady growth. 1. In the life science business, the company gives full play to the technological leadership of the industry leader, continues to evolve in the direction of high-end enzymes, upgrades and iterates several series of products, strives to meet more application scenarios and customer needs, and achieves good results. at the same time, the company continues to build related R & D and production capacity in the fields of diagnostic raw materials, animal health care, injection molding consumables and other fields. at present, a number of mature products have been sold online. It is expected to support the sustained and rapid development of the company's life science business in the future. 2. Biomedical business, focusing on the three major product lines of new drug research and development reagents / vaccine evaluation reagents, vaccine clinical CRO services and vaccine raw materials, the company continues to improve in terms of performance and quality, service level, customer experience and operation management. At present, the company has reached in-depth strategic cooperation with many customers, which is expected to contribute considerable revenue in the future. 3. In vitro diagnosis business, the company has established a relatively rich POCT product line, with end customers covering more than 2300 medical institutions, and achieved good performance driven by innovative product projects such as gastric function and autoimmunity. At the same time, characteristic projects such as respiratory pathogen detection have also begun to appear on the market one after another, which is expected to accelerate the performance of relevant sectors in the future.

Incentive assessment of three-year regular growth rate of 25%, is expected to boost confidence in development. The company issued a 2023 restricted stock incentive plan, which proposed to grant 8.5 million restricted shares, accounting for 2.12% of the company's total share capital, and no more than 781 people were encouraged, accounting for 19.07% of the company's total employees at the end of 2022, including middle managers and core staff. The assessment target of the incentive plan is that the cumulative operating income in 2023, 2024 and 2025 is not less than 12.50,28.00 and 4.75 billion yuan, respectively. Corresponding to 2023 (regular)-2025, the annual income increases by 23.3%, 24.0% and 25.8%, and the annual income is 12.5,15.5 and 1.95 billion yuan. This is the first public incentive plan issued by the company after listing, which is expected to fully mobilize the enthusiasm of the core team, stimulate the development vitality of various business lines, deeply bind the company's interests with the team, and promote the sustained and rapid development of the company's regular business.

Profit forecast and investment advice: according to the performance data, we adjust the profit forecast. It is expected that the conventional business will continue to grow at a high speed. COVID-19 's base may cause short-term fluctuations. The company's income is expected to be 12.74,16.61 and 2.102 billion yuan in 2023-2025. Before the adjustment, 14.87,20.37 and 2.842 billion yuan, an increase of-64%, 30% and 27% over the same period last year The net profit of homing was 0.63,1.96 and 311 million yuan, compared with 3.94,5.38 and 756 million yuan before the adjustment, an increase of-89%, 210% and 59% over the same period last year.

Considering that the company is the leader in the domestic biological reagent industry, it is expected to maintain high growth and maintain a "buy" rating in the future.

Risk prompt events: new product research and development risk, policy change risk, market competition aggravating risk and so on.