1H23 revenue and net profit due to COVID-19 testing demand decline compared with the same period last year, we believe that ICL has cost and efficiency advantages, short-term performance disturbance does not change the long-term growth potential, COVID-19 epidemic to a certain extent accelerated the improvement of ICL penetration. In addition, COVID-19 's receivables are mostly concentrated in more financially relaxed areas such as the Greater Bay area and Shanghai, and the risk of impairment receivable is relatively manageable. Maintain a "buy" rating with a target price of HK $17.2.
1H23 performance: revenue from-65% to 480 million yuan, of which the core non-COVID-19 testing income + 28%. According to the type of business, the revenue of diagnosis outsourcing / testing services for medical federation / testing services provided for non-medical institutions is-63% compared with the same period last year. According to the testing items, the co-built laboratories previously used for COVID-19 testing are gradually converted to infectious disease testing, and we expect 1H23's infection testing revenue (excluding COVID-19) to be + > 30% compared with the same period last year. In addition, the income of blood and pathological tests increased by + > 20% compared with the same period last year. Gross margin year-on-year-9.1pcts to 38.1%. The decline in gross profit margin is mainly due to the reduction of scale effect caused by the decline in inspection and measurement. The company 1H23 launched a special plan to reduce cost and increase efficiency, and it is expected that gross profit margin will gradually increase on the basis of 1H23 in the future. The net profit of returning home is-79% to 48.72 million yuan compared with the same period last year.
COVID-19 's receivables are mostly concentrated in developed areas, and the overall risk can be controlled. At the end of 1H23, the company's accounts receivable was 1.94 billion yuan, and the current refund was 970 million yuan. In July, the State Council issued the opinions on promoting the Development and growth of the Private economy, requiring all localities to improve the mechanism for preventing and cleaning up arrears, and various localities are studying and introducing landing policies. As the company's accounts receivable are mainly concentrated in the Greater Bay area, Shanghai and other relatively well-off areas, the impairment risk of receivables is expected to be relatively controllable.
The overall performance of 2023E will be disturbed by COVID-19 clearance, but the core business will maintain steady growth. Due to the clearance of COVID-19 's testing demand, ICL's revenue and net profit were under pressure during the year (1H23 income / non-net profit:-48% 1H23 income / non-net profit:-36% Universe 82%), but considering the cost and operational advantages of ICL, there is still plenty of room for long-term penetration improvement. For Yunkang, the market share of companies in southwest and central China is relatively low, and the growth space can be broadened by increasing hospital coverage and in-hospital departments and testing projects, while for South China, where the market share is higher, the depth of clinical department coverage will be mainly expanded to obtain growth space. In the short term, we estimate that the company's core non-COVID-19 business 2022-25e income CAGR 30%.
Maintain a "buy" rating with a target price of HK $17.2. As COVID-19 detected the clearing faster than we had expected, we adjusted our financial forecast based on 1H23. We expect 2023-25e to have revenue of RMB 990 million / 1.27 billion / 1.63 billion and net profit of 76.59 million / 120 million / 170 million, using DCF to value the company (WACC 11.0%, sustainable growth 2.0%) with a target price of HK $17.2.
Investment risk: policy risk, ICL competition pattern intensifies.