Report summary:

Jiuqiang Biotech is a high-tech industrial company whose main business is R&D, production and sales of clinical in vitro diagnostic products. Based on the traditional advantage of biochemical diagnosis, it has expanded into various fields such as blood clotting diagnosis, blood type testing, pathological diagnosis, and liquid biopsy. It continues to transform into an IVD platform enterprise, and has long-term development potential. This report mainly analyzes the performance growth logic and development opportunities of Jiuqiang Biotech from three aspects: (1) the market development status of the in vitro diagnosis industry and company layout segments; (2) the company's existing production lines and competitive advantages; and (3) state-owned investment and brand cooperation and empowerment:

The biochemical diagnosis business is leading the industry, and related strategic cooperation continues to advance. The company has been deeply involved in the field of biochemical diagnosis for more than 20 years. Its product performance advantages are remarkable, and strategic cooperation with foreign manufacturers continues to advance.

Factor 1: As a leading company in biochemical diagnosis, the company has established biochemical R&D platforms such as chemical method, enzymatic method, normal immune turbidimetry method, and latex enhanced immune turbidity method; high-end diagnostic reagents such as cystatin C and homocysteine are at the leading level in China.

Factor 2: The company has established close partnerships with many foreign leaders such as Abbott, Roche, and Beckman, demonstrating the leading position of biochemical diagnostic reagents in the industry. The product performance and quality control system are highly recognized, laying a solid foundation for international business expansion.

Actively expand the booming circuit and enrich the production line layout. The company actively lays out booming circuits for blood clotting diagnosis, liquid biopsy, and pathological diagnosis through epitaxial mergers and acquisitions and investment and shareholding.

Blood coagulation diagnosis: The company acquired Meixin in 2017 and entered the blood coagulation circuit. It has a complete product line such as coagulation reagents, instruments, and assembly lines, and won the bid for the entire blood coagulation collection in '23.

Pathological diagnosis: The company acquired Maixin Biotech to expand the pathological diagnosis business, deepening the field of immunohistochemistry. Relevant technology continues to break through, the R&D transformation process is accelerated, and its products are comparable to foreign investment.

Liquid biopsy: The company invests in the field of liquid biopsy CTC. Its self-developed “polypeptide nano magnetic bead” CTC capture technology is more sensitive and can achieve molecular typing.

Sinopharm invests in shares, empowering the company's development in multiple dimensions. As of September 2023, China Pharmaceutical Investment held 16.63% of the company's shares, making it the company's largest shareholder.

Dimension 1: Sinopharm Investment provides the company with high-quality customer and channel resources to help the company further expand sales and increase the market share of high-end customers in level 2 and above hospitals.

Dimension 2: Relying on Sinopharm's strong capital raising and business integration capabilities, the company may carry out a new round of mergers and acquisitions, continue to enrich production lines, and form collaborative development.

Profit forecast and investment advice: The company is expected to achieve revenue of 17.95/21.50/2,650 billion yuan in 2023-2025, and net profit to mother of 5.12/634/805 million yuan, corresponding earnings per share of 0.87/1.08/1.37 yuan/share. We believe that the company has the potential for long-term growth and maintains the company's “buy” investment rating based on the biochemical advantage business and the continuous expansion of rich production lines and the enabling benefits of state-owned assets.

Risk warning: risk of drastic price reduction in collection, risk of product sales and valuation results falling short of expectations, etc.