Introduction to this report:

Asset impairment losses are poised to drag down profits. The company is speeding up the adjustment of agency products and direct sales business. Independent conventional reagents are growing steadily, assembly line promotion is going smoothly, and future reagent increases can be expected. Maintain an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. Considering credit impairment and asset impairment losses, increased marketing and R&D investment, the 2023-2025 EPS forecast was lowered to 0.64/0.97/1.16 yuan (originally 0.80/1.08/1.38 yuan). Referring to comparable company valuations, the target price was maintained at 18.40 yuan, corresponding to 2024 PE 19X, and maintaining an increase in holdings rating.

Impairment losses dragged down profits, and performance was in line with expectations. In Q1-3 of 2023, the company achieved revenue of 2,215 million yuan (-22.19%), net profit of 269 million yuan (-55.27%), net profit of 275 million yuan (-54.38%), net profit of 275 million yuan (-54.38%); of these, Q3 achieved revenue of 734 million yuan (-21.58%), net profit of 94 million yuan (-51.84%), and net profit of 97 million yuan (-52.35%). Q1-3 Changes in market demand led to a 98.71% drop in revenue from molecular diagnostic products. After accounting for various asset impairment preparations, the total amount was 73 million yuan. The performance was basically in line with expectations.

Product structure optimization, steady growth of independent conventional reagents. The company is speeding up the adjustment of agency products and direct sales business, and increasing the sales share of independent products and the market share of independent products. Q1-3 Independent product conventional reagent sales revenue was 1,255 billion yuan (+9.69%), and the revenue share increased to 63.93%. Immunization reagents are expected to grow steadily, biochemical reagent sales to be stable, and diagnostic reagents to grow rapidly. At the same time, operating efficiency was improved. Q1-3 The collection of accounts receivable and the net cash flow from operating activities improved.

The assembly line has been successfully promoted, and an increase in reagents can be expected. The company vigorously promotes the marketing of intelligent inspection and analysis assembly line products throughout the laboratory and collaborates with stand-alone terminal installations on various platforms. Q1-3 survival and blood flow lines have shipped 262 units. The assembly line collaborated with stand-alone machines to achieve 2,585 large-scale instruments (pieces) of independent products. The instruments introduced into the terminal market will continue to increase reagent sales.

Risk warning: New product development and sales fall short of expectations; collection policies uncertain