Incident: Recently, the company released its 2023 annual report: annual revenue of 1,146 million yuan, up 16.55% year on year; net profit to mother of 329 million yuan, up 30.65% year on year; deducted non-net profit of 313 million yuan, up 34.39% year on year; net operating cash flow of 304 million yuan, up 11.82% year on year.
Among them, revenue for the fourth quarter of 2023 was 337 million yuan, up 8.71% year on year; net profit to mother was 124 million yuan, up 25.64% year on year; net profit after deducting non-net profit of 125 million yuan, up 39.68% year on year; and net operating cash flow was 180 million yuan, up 10.40% year on year.
Luminescence and saccharification have become the main growth engines. Dermatology and aesthetic products have been recognized by the industry. The company's two major product line products, in-vitro diagnostic products and treatment and rehabilitation products, continue to be enriched and improved. At the same time, the company's marketing capabilities have been further strengthened, driving the main business revenue to show a good growth trend.
From a product perspective, (1) in vitro diagnostic line products: competitiveness in domestic and international markets has been further improved, and clinical applications continue to increase. In particular, the two major series of products, luminescence and glycation, have driven related performance growth. In 2023, the company's in vitro diagnosis business achieved revenue of 829 million yuan, accounting for 72% of revenue, up 11% year on year, and increased 21% year on year after excluding the base of epidemic products in the 2022 international market; (2) Treatment and rehabilitation products: core clinical medical products such as air waves and sputum removal machines continued to maintain good performance growth. At the same time, dermatology and aesthetic products received positive reviews from the industry to drive performance growth in the new business segment. The annual treatment and rehabilitation business achieved revenue of 304 million yuan, accounting for 27% of operating revenue, an increase of 34% year on year. The growth rates for products and household products were 32% and 67%, respectively.
From a regional perspective, the company has strengthened domestic and international marketing system capacity building, and product coverage has improved significantly, driving the company's product sales growth. Domestic business revenue in 2023 was 809 million yuan, accounting for 71% of total main business revenue, up 24% year on year; international business revenue was 324 million yuan, accounting for 29% of total main business revenue, a slight increase of 0.47% year on year. Excluding the epidemic in 2022, the product base increased 21% year on year.
The share of high-margin products increased the profit level. The net margin increased by 3.03 pct year on year. In 2023, the company's comprehensive gross margin increased 7.29pct to 65.81% year over year. We expect this is mainly due to continuous optimization of the product structure and an increase in the sales share of high-margin products. Among them, the gross margin of the in vitro diagnosis business increased 8.95pct to 65.22% year over year, and the gross margin of treatment and rehabilitation business increased 2.77pct to 70.83% year over year.
In terms of period expenses, the sales expense ratio increased by 1.95 pct to 16.99% year on year, mainly due to the increase in sales staff wages and travel expenses and the corresponding increase in promotion fees for e-commerce platforms starting operation in 2023; the management fee ratio increased by 0.66 pct to 5.32% year over year, due to the increase in the size of major companies, increased personnel remuneration and the increase in depreciation expenses corresponding to the transfer of fixed assets in construction projects; the R&D cost ratio decreased by 2.55 pct to 14.82% year over year, mainly due to a decrease in evaluation and consulting fees; the financial expenses ratio increased 0.87 pct year over year To -2.76%, mainly due to exchange rate fluctuations in the current period; under the combined influence, the company's overall net interest rate increased by 3.03pct year-on-year to 28.58%.
Among them, the comprehensive gross profit margin, sales expense ratio, management expense ratio, R&D expense ratio, financial expense ratio, and overall net profit margin for the fourth quarter of 2023 were 64.35%, 7.74%, 4.69%, 9.25%, -0.77%, and 36.61%, respectively, with changes of +7.98pct, -3.50pct, +0.84pct, -0.95pct, -1.25pct, and +4.88pct, respectively.
Profit forecast and investment rating: Based on analysis of the company's core business segments, we expect 2024-2026 revenue to be 1,459 million/1,841 million/2,254 million, with year-on-year growth rates of 27%/26%/22%, respectively; net profit to mother of 423 million/528 million/652 million, respectively; EPS of 0.99/1.23/1.52, corresponding to 18 times PE in 2024, according to the closing price on March 29, 2024. We believe the company is currently undervalued and maintains a “buy” rating.
Risk warning: Risk of changes in industry regulatory policies, increased risk of fierce competition, risk of loss of core technical staff, risk of failure in developing new products.