23Q3 revenue grew steadily, and non-net profit deducted was affected by exchange rate changes and R & D investment. 2023Q1-3 realized income of 708 million (+ 18.1%), net profit of 174 million (- 22.5%), and non-return net profit of 154 million (+ 27.1%). 23Q3 realized income of 249 million (+ 20.4%), net profit of 47 million (- 65.2%), and non-return net profit of 45 million (+ 0.3%). The apparent sharp decline in homing net profit was mainly due to the completion of technology transfer of SDC2 products by 22Q3, which generated a non-recurring profit and loss of 80.39 million in the same period last year. The flat net profit deducted from non-return is mainly due to exchange rate changes (increased financial expenses due to exchange losses on foreign currency assets held) and increased investment in research and development.
Gross profit margin remains stable and cash flow remains healthy and high quality. 23Q1-3 gross profit margin is 83.6% (+ 0.4pp), sales expense rate is 31.5% (- 3.3pp), management expense rate is 7.5% (- 0.8pp), R & D expense rate is 21.3% (+ 1.0pp), financial expense rate is-3.2% (+ 1.9pp). In a single quarter, 23Q3 gross profit margin is 83.5% (year-on-year level), sales expense rate is 31.7% (- 6.0pp), management expense rate is 7.2% (year-on-year level), R & D expense rate is 23.7% (+ 2.4pp), financial expense rate is 0.4% (+ 8.6pp), deduction of non-net interest rate is 17.9% (- 3.8pp). In the first three quarters of 2023, the net operating cash flow was 215 million (+ 124.9%), with a ratio of more than 120% to the return net profit, and the cash flow continued to maintain healthy and high quality. At the end of the third quarter, the book balance of the company's monetary funds was 528 million.
Approved high-throughput gene sequencer and further deepened cooperation with international leaders in concomitant diagnosis. The company officially approved the high-throughput gene sequencer ADx-SEQ200 Plus in September 2023, which meets most of the needs of tumor molecular diagnosis, is suitable for in-hospital development, and can match automatic nucleic acid extraction instrument and automatic reporting system. In August, the company further expanded its cooperation with AstraZeneca PLC to develop its human 10 gene mutation kit based on Enhertu drugs for concomitant diagnostic use to screen NSCLC patients with positive HER2 (ERBB2) mutations. Through the continuous growth of R & D expenses and personnel investment for more than a decade, the company has created PCR, NGS, IHC, FISH and other technical platforms needed for accurate cancer treatment, constructed a comprehensive concomitant diagnosis product system from targeted therapy to immunotherapy, and successfully developed and approved 24 kinds of single-gene and multi-gene tumor detection products, many of which are still exclusively approved in China. And some products have been successfully registered overseas and incorporated into health insurance in Japan, South Korea and other countries. China's diagnostic market is in the early stage, with a market size of nearly 4 billion in 2020, and will maintain rapid growth with the development of precision medical care.
Investment suggestion: due to the influence of exchange rate changes and equity incentive fees, the profit forecast is revised downwards. It is estimated that the net return profit for 2023-25 will be RMB 2393max 367 million (originally RMB 257pm), a year-on-year increase of-9.6%, 23.0% and 25.2%, and the current share price corresponds to the 34-28-22 times of PE. Eddard Biology is a leading enterprise in the field of accurate diagnosis of tumors. It has constructed a comprehensive concomitant diagnosis product system from targeted therapy to immunotherapy. The products go to sea smoothly, have a broad space for medium-and long-term development, and maintain a "buy" rating.
Risk tips: research and development progress is lower than expected; overseas sales promotion is not as expected; collection and acquisition price reduction risk.