Events:

The company released the semi-annual report of 2023, 2023H1, the company achieved operating income of 607 million yuan (YoY-78.66%), net profit of 123 million yuan (YoY-87.44%), net profit of 102 million yuan (YoY-89.45%), net cash flow from operating activities of 72 million yuan (YoY-80.50%), and total assets of 6.17 billion yuan (compared with the end of 2022-8.34%).

2023Q2, the company realized operating income of 305 million yuan (YoY-77.13%), net profit of 57 million yuan (YoY-87.99%), and non-return net profit of 42 million yuan (YoY-91.14%).

Comments:

1. Due to the change of industry demand, the performance is under short-term pressure, and the routine molecular diagnosis business is carried out in an orderly manner. Affected by the change in industry demand, the company's 2023H1 revenue decreased, including 255 million yuan for medical laboratory services (YoY-88.43%) and 351 million yuan for molecular diagnostic products (YoY-44.85%), but the turnover of conventional molecular diagnostic products and services increased. Excluding emergency public health service testing products, the usage of other molecular diagnostic products was 6.07 million (YoY+25.47%). Compared with 2019, there was an increase of 58.37% compared with the same period in 2019. The number of people used by Jing Q2 reached 3.57 million (QoQ+42.69%), maintaining steady growth.

two。 Actively promote the development of HPV, maternal and child health testing business, and strengthen the expansion of molecular diagnosis. The country continues to promote cervical cancer screening, eugenic testing and other maternal and child health protection services, and the company continues to expand related business as the forerunner of cervical cancer screening-HPV nucleic acid testing. As of 2023H1, the company has used more than 62 million HPV testing products and nearly 5 million H1 users (YoY+27.99%), an increase of 60.28% over the same period of 2019. The HPV12P2 product has been approved by NMPA, which is the first in China to increase the expected use of cervical cancer screening, cervical cancer joint screening and ASC-US population triage. In addition, as of 2023H1, the company has used more than 3.3 million thalassemia gene testing products, more than 2.4 million deafness gene testing products and more than 3.3 million STD series users, providing integrated diagnostic solutions for the prevention and control of birth defects.

3. We will continue to strengthen the construction of medical laboratories and focus on the development and promotion of nucleic acid molecular diagnostic products. The company provides accurate medical examination and molecular pathology services for medical institutions at all levels throughout the country. by the end of 2023H1, 17 pathology centers have obtained qualifications, with more than 400,000 samples tested annually, and increased investment in the construction of clinical mass spectrometry testing platform and laboratory expansion. In addition, the company continues to focus on molecular diagnostic reagents and instrument research and development, 2020-2022 company R & D total investment of more than 450 million yuan, CAGR reached 60.61% TX 2023H1 company R & D investment of 79 million yuan, accounting for 13.03% of the total revenue. The company continues to enrich the product pipeline, in reproductive tract, respiratory tract virus detection, birth defect detection, tumor early diagnosis and other aspects of products are under research or have entered the clinical, in which the self-developed "chloroquine phosphate gel" has obtained patents in China, South Korea, Japan, the United States and other countries, realizing the natural extension from innovative science and technology detection of HPV to innovative drug treatment HPV. "Human ALDH2 Gene Detection Kit (fluorescent PCR melting curve method)" has obtained the registration certificate of three types of medical devices, and it is the first individualized drug product approved by the company on the platform of fluorescent PCR melting curve.

Profit forecast: we expect the company's revenue from 2023 to 2025 to be 16.25,21.29 and 2.703 billion yuan respectively, with year-on-year growth rates of-70.97%, 31.04% and 26.97% respectively, and net profit of 3.52,4.66 and 617 million yuan respectively, with year-on-year growth rates of-79.62%, 32.55% and 32.26% respectively. The corresponding share price PE is 17,13 and 10 times respectively. Taking into account the impact of industry clean-up, downgraded to "recommended" rating.

Risk tips: product sales are not as expected, collection price reduction risk, market expansion is not as expected, new product research and development is not as expected, market competition is intensified, industry policy change risk and so on.