Key points of investment
Investment logic: The traditional molecular testing business covers the entire “core materials+kit+testing service” business process, bringing steady growth; Helicobacter pylori drug resistance testing products are expected to be approved in 2024, leading to a second growth curve.
Helicobacter pylori drug resistance testing is expected to be approved as the first product in 2024, contributing to a peak sales of 1.5 billion yuan: ① The medical burden of many digestive diseases and gastric cancer in China is heavy, and Helicobacter pylori (Hp) infection is the main related causative factor, and Hp infection is associated with 65% of gastric cancer deaths. The incidence rate of Hp is as high as 44%, and there is an urgent need to solve the problem of antibiotic resistance in clinical treatment, so as to improve treatment efficiency. ② Fecal nucleic acid products take into account the advantages of high sensitivity, non-invasiveness, and high detection throughput, and are suitable for drug resistance testing and large-scale screening. At the same time, due to technical difficulties, only Kangwei Century 1 Hp testing products use the fecal nucleic acid method, and it is expected to be the first domestic product approved for sale in 2024. ③ Assuming that the target population of Hp testing products includes recommended gastric cancer risk screeners and routine medical examiners, then we estimate that the number of people screened in 2024 could reach 383 million people. ④ We assume that the terminal price for Hp negative and negative tests and drug resistance tests is 298 yuan and 798 yuan, respectively, and that the factory price is about 30%. Along with the spread of the importance of drug resistance testing, the advancement of early screening for Hp infections and gastric cancer, and the development of corporate market education, the number of customers who choose drug resistance testing in one step is gradually increasing. ⑤ We predict that the total sales volume of Kangwei Century Hp testing products will be 0.1, 0.9, and 180 million yuan in 2023-2025; sales will peak at 1.5 billion yuan in 2030.
Deeply involved in the molecular testing industry, integrating the entire business process of reagents and services: The company has accumulated R&D in the field of molecular testing for more than ten years, formed a relatively complete product system, and has a strong technical level in the industry. It is one of the few domestic enterprises with a layout in all business segments of molecular testing, covering the entire “core materials+kit+testing service” business process of molecular testing. The next opportunities are mainly due to the spread of early cancer screening and at-home testing, the application of modern medical testing methods, and the expansion of market size and surging demand for domestic alternatives driven by the pandemic.
Profit forecasting and investment ratings: There are large differences in valuation methods between the company's businesses. We use segmental valuation, traditional business uses PE valuation, and the emerging business represented by Hp series products uses PS valuation. We believe that the company's target market value for 2024 is about 3 billion yuan. Considering the company's advanced and integrated layout in the nucleic acid storage and purification business+the extended performance growth rate is faster than the company+the innovative properties and clinical needs of Hp series products are highly covered for the first time, giving them a “buy” rating.
Risk warning: the risk of delays in approval and promotion of new products falling short of expectations; risk of dealer management; strategic and management risks brought about by the expansion of business scale.