Event: according to the company's third-quarter report in 2023, the company's total revenue in the first three quarters of 2023 was 199 million yuan, down 27.01% from the same period last year; the net profit was 19 million yuan, down 48.58% from the same period last year; and the net profit from non-return was 17 million yuan, down 46.14% from the same period last year. 23Q3 realized revenue of 71.2529 million yuan, down 28.53% from the same period last year; net profit from home was 2.5936 million yuan, down 83.09% from the same period last year; and net profit from non-return was 1.7949 million yuan, down 86.42% from the same period last year.

Comments:

The tumor business grew steadily, and the decline in revenue from the testing business led to a significant decline in net profit: in the third quarter of 2023, the company achieved a revenue of 71.2529 million yuan (YOY-28.53%), a net profit of 2.5936 million yuan (YOY-83.09%), and a net profit of 1.7949 million yuan (YOY-86.42%). The growth rate of 23Q3 revenue and net profit decreased significantly compared with the same period last year, mainly due to a decline in testing business revenue compared with the same period last year. After deducting unconventional testing business income, 23Q3 tumor-related business income increased by 26.88% compared with the same period last year. 23Q3's gross profit margin increased by 18.5pp to 79.94%, sales expense rate increased by 10.6pp to 27.40%, management expense rate increased by 13.84pp to 22.45%, and financial expense rate increased by 2.01pp to-1.45% year-on-year.

Investment in product research and development continues to increase, and actively promote product approval and admission: the company's R & D expenditure in the third quarter of 2023 was 19.0432 million yuan, an increase of 5.78% over the same period last year. In the hematology business, the company has reached a strategic cooperation with large agents Guorun Medical and Guoyao Shengkang, hoping to shorten the admission time of 15 leukemia fusion gene kits with the help of the expansion of agency channels. In terms of solid tumor business, the registration speed of human EGFR gene T790M mutation detection kit is not as fast as expected, and it is expected to obtain three types of medical device certificates by the end of 2023. The company is expected to accelerate the admission of 15 leukemia fusion gene test kits and lymphoma gene rearrangement test kits, increase the sales revenue of the company's core products, and contribute to the company's long-term development in the future.

Steadily promote industry-university-research cooperation and jointly develop gene big data intelligent computing platform: the company steadily promotes industry-university-research cooperation and gene big data intelligent computing platform jointly developed with Chongqing big data Research Institute of Peking University, it is committed to the overall solution for the whole life cycle management of genetic data from generation, storage, integration, calculation, analysis to application. It can be applied to the data analysis of tumors, genetic diseases, transmitted infections, rare diseases and prenatal gene testing, which is helpful to promote the development of accurate medical care and empower the long-term growth of oncology business.

Profit forecast, valuation and rating: we maintain the forecast of the company's homing net profit for 23-25 years at 0.41 trillion yuan, up 2.34%, 21.84% and 24.04% over the same period last year. Considering the steady progress of the company's industry-university-research cooperation, the incubation results are expected to gradually fall to the ground, and we maintain the "buy" rating.

Risk hint: the product promotion is not as expected, and the market competition aggravates the risk.