At present, domestic high-end reagents are still mainly imported enterprises, and there is a wide space to replace them, while Aladdin is a leading manufacturer of scientific research reagents in China. In the short term, with the disturbance factors gradually eliminated, the company is expected to resume rapid growth; in the medium to long term, the company has persisted in building its own brand of independent scientific research reagents, "import substitution" as its own responsibility, focusing on innovative research and development; at present, the company's brand enjoys a good reputation and plans to develop more than 30,000 SKU in the next three years. Combined with the first-mover advantages of the company's e-commerce platform, the company speeds up its march into the field of life science reagents, which is expected to further boost the company's scale expansion. To sum up, we give the company 50 times PE in 2023, adjust the target price to 26 yuan, and maintain the "overweight" rating.

The company's 2023H1 performance has maintained steady growth, and the profit end is under short-term pressure affected by many factors. The company's 2023H1 realized operating income of 185 million yuan, up 4.57% from the same period last year; net profit from home was 31 million yuan, down 38.49% from the same period last year; and net profit from non-return was 30 million yuan, down 35.01% from the same period last year.

From a quarterly point of view, the company's 23Q2 achieved operating income of 99 million yuan, an increase of 15.90% over the same period last year, a net profit of 14 million yuan, a decrease of 28.98%, and a non-return net profit of 13 million yuan, a decrease of 28.97% over the same period last year.

The slowdown of the company's revenue growth is mainly due to: 1) since April 2023, macroeconomic indicators have weakened more than expected, the industry terminal demand has been weak, and the company's operating income growth has slowed down; 2) the sales revenue in January 2023 is low and the base is high in June 2022, resulting in a year-on-year slowdown in 2023H1 revenue growth. 3) specific products such as streptavidin and guanidine isothiocyanate accounted for a relatively high share of revenue in 2022, which also affected the growth rate of operating income in 2023; excluding the income from related specific products mentioned above, the real growth rate in the first half of 2023 was 21.22%.

In terms of profitability, the company's 2023H1 gross profit margin was 59.50%, down 0.22pcts from the same period last year, of which 23Q2 quarterly gross profit margin was 57.75%, which increased 0.57pcts from the same period last year and decreased 3.76pcts from the previous year. 2023H1 net interest rate was 16.67%, down 11.67% from the same period last year. During the reporting period, the company's sales expense rate, management expense rate, R & D expense rate and financial expense rate were 8.20%, 16.89%, 14.21%, 0.16% respectively, compared with the same period last year + 0.99/+4.59/+4.74/+1.30pcts (total + 11.62pcts). The growth of the company's net profit is slower than that of income: 1) since the second half of 2022, with the promotion of fund-raising projects, the company's managers and R & D personnel have increased rapidly, resulting in a rapid increase in personnel salary expenditure. 2) the share payment generated by equity incentive also increases the corresponding fees, of which the share payment fee in the first half of 2023 is 3.62 million yuan, regardless of the impact of share payment, the net profit belonging to the shareholders of the listed company is 34.53 million yuan.

R & D / new product development / fund-raising projects continue to advance, and the company has strong certainty of medium-and long-term rapid growth. 2023H1 invested 26.36 million yuan in R & D, an increase of 56.86% over the same period last year, with 179 R & D personnel, an increase of 36.64% over the same period last year.

The company has been committed to the R & D and production of scientific research reagents needed by national strategic emerging industries, abandoning the development strategy of acting foreign brands, and independently creating "Aladdin" brand scientific research reagents and "core Silicon Valley" brand experimental consumables, focusing on the research and development of scientific research reagents and the addition of varieties.

In addition, the company's fund-raising projects are being carried out in an orderly manner. As of 2023H1, according to the company's mid-2023 report, the cumulative investment progress of cloud e-commerce platform and marketing service center is 61.97%, which is expected to be available in October 2023; the cumulative investment progress of high purity scientific research reagent R & D center is 76.39%, which is expected to be available in October 2023; the progress of investment in the construction and supporting projects of high purity scientific research reagent R & D center is 32.39%, which is expected to be available in March 2024. The project investment schedule of the production base of high purity scientific research reagent is 5.36%, and it is expected to be available in March 2024. The project investment schedule of Zhangjiang Biological Reagent R & D Laboratory is 25.04%, which is expected to be available in March 2024. We believe that as a leading domestic R & D and production enterprise of scientific research reagents, the company's performance is expected to resume rapid growth with the gradual recovery of terminal demand, with strong medium-and long-term growth certainty-23H1 final inventory is 440 million yuan, an increase of 60.77% over the same period last year; fixed assets are 229 million yuan, an increase of 25.31% over the same period last year Projects under construction totaled 32 million yuan, an increase of 354.55 percent over the same period last year, and accounts payable (and bills) totaled 77 million yuan, up 17.86 percent over the same period last year.

Risk factors: the risk that the market competition will lead to the decline of gross profit margin; the SKU expansion of the company's products is not as expected; the risk of rising labor costs and brain drain; the risk of rising raw material costs.

Profit forecast, valuation and rating: at present, domestic high-end reagents are still mainly imported enterprises, with broad alternative space, while Aladdin is a leading manufacturer of scientific research reagents in China. In the short term, with the disturbance factors gradually eliminated, the company is expected to resume rapid growth; in the medium to long term, the company has persisted in building its own brand of independent scientific research reagents, "import substitution" as its own responsibility, focusing on innovative research and development; at present, the company's brand enjoys a good reputation and plans to develop more than 30,000 SKU in the next three years. Combined with the first-mover advantages of the company's e-commerce platform, it is expected to speed up the march into the field of life science reagents, which is expected to further boost the expansion of the company. To sum up, taking into account the changes in equity and the impact of the 23Q1 epidemic on the company's first-half results, we adjusted the company's annual EPS forecast for 2023-24-25 to 0.51 EPS 0.68 won (the original forecast was 0.95 won 1.24 shock 1.66 yuan), and the current price corresponding to PE is 38X/28X/21X. We refer to the current comparable companies (Titan Technology, Haoyuan Pharmaceutical, Pharmaceutical Technology, etc.; based on the Wind consensus expectation) with an average PE of 29 times in 2023, and considering that the company, as a leading manufacturer of scientific research reagents in China, is expected to restore steady growth under the gradual elimination of the impact of the epidemic in 2023, so give the company 50 times PE in 2023, adjust the target price to 26 yuan, and maintain the "overweight" rating.