Incident: The company released its 2023 annual report. The company achieved operating income of 3,930 billion yuan (+28.97%), net profit of 1,654 billion yuan (+24.53%), net profit of 1,547 billion yuan (+24.72%), and operating cash flow of 1,418 billion yuan (+47.37%); 2023Q4 achieved operating income of 1,022 million yuan (+36.16%) and net profit of 467 million yuan (+15.77%), net profit of 446 million yuan (+15.77%) after deducting non-net profit of 446 million yuan (+14.98%).
Domestic: The smooth promotion of high-speed machines has led to a steady increase in reagent sales. In 2023, the company's main domestic business achieved revenue of 2,601 billion yuan (+25.53%), of which: ① instruments: revenue increased 33.53% year-on-year, mainly benefiting from the smooth promotion of high-speed models such as X8 and X6. The company installed 1,465 fully automated chemiluminescence instruments throughout the year (mainframes account for 63.34%); ② reagents: revenue increased 23.73% year-on-year, with the third-tier hospitals covered by the company's services (155 new in 2023), and the top three hospitals (67 new in 2023) continued to increase, and China The installed capacity of large-scale machinery and assembly line products is growing, and the company's domestic reagent business revenue is expected to continue to grow steadily in the future.
Overseas: The reagent business is growing rapidly, and global influence continues to be built. In 2023, the company's overseas business achieved revenue of 1,319 billion yuan (+36.16%), of which: ① instruments: revenue increased 16.91% year-on-year, and achieved sales of 3,564 light-emitting instruments throughout the year, accounting for 56.73% (+20.19pct); ② reagents: revenue increased 54.56% year on year, mainly benefiting from the rapid increase in the number of installed machines and the continuous increase in the share of medium to large machines in overseas markets. Through active academic promotion and marketing system optimization, combined with the increasing improvement of overseas production lines and channels, the breadth and depth of the company's overseas market coverage has been further enhanced. At present, the company has completed the establishment of 10 wholly-owned overseas subsidiaries to promote continuous business growth in key overseas regions.
The revenue structure continues to be optimized, and profitability is increasing. The company's gross margin for the full year of 2023 was 72.96% (+2.7pct), 76.59% (-0.75pct)/65.80% (+9.93pct) domestic/foreign respectively, and 89.28% (+0.27pct)/29.70% (+6.60pct) of reagents/instruments, respectively. Among them, the increase in gross margin of instrument products is mainly based on the increase in the sales share of X series and medium to large light emitting instruments, and the gross margin of reagent products is rising steadily. It is expected to be mainly due to the further development of the cost reduction effect of self-production and the dilution of production costs due to product release. Changes in gross margin at home and abroad are mainly related to the revenue structure. Furthermore, as of 2023, the company's business has covered 1,535 of the top three hospitals in China, with a coverage rate of 57.46%, and provided services to medical terminals in 152 overseas countries/regions. Increased coverage of high-grade hospitals and continued breakthroughs in more overseas countries/regions have laid a good foundation for the company's future reagent intake.
R&D maintains a high level of investment, and production lines for instruments and reagents are becoming more and more abundant. In 2023, the company invested 366 million yuan (+15.21%) in R&D, accounting for 9.31% (-1.12pct) of revenue. In terms of R&D results:
1) Reagents: Continuously exploiting the advantages of key raw material R&D platforms, we have achieved the development of a total of 6 small-molecule double antibody sandwich reagents with 25-hydroxyvitamin D, aldosterone, estradiol, free triiodothyronine, and tacrolimus; 2) Instruments: Adhering to the goals of “sales generation, R&D generation, and reserve generation”, Molecule R8 fully automatic nucleic acid detection and analysis system, Biossays E6Plus, MAGLUMI X10, Biossays C10, HEMOLUMI H6 and re-production of the SATLARS T8. As of 2023, the company has sold 10 fully automatic chemiluminescence immunoanalyzers and 199 supporting reagents to the world (188 approved by the EU; 245 domestically certified, covering 172 reagents), covering testing items such as tumor markers, thyroid, infectious diseases, gonadal, myocardial markers, inflammation monitoring, sugar metabolism, bone metabolism, liver fibrosis, and autoimmune antibodies.
Investment advice: The company is a domestic chemiluminescence leader. High-end models and assembly lines at home and abroad continue to be installed, driving rapid growth in the reagent business. We expect the company's net profit from 2024 to 2026 to be 20.63/25.36/3,063 billion yuan, up 24.77%/22.89%/20.80% year-on-year, and EPS of 2.63/3.23/3.90 yuan respectively. The current stock price corresponding to 2024-2026 PE is 25/20/17 times, maintaining the “recommended” rating.
Risk warning: Risk of overseas market expansion falling short of expectations, risk of price reduction exceeding expectations due to collection, risk of increasing reagent volume, and increased industry competition.