Recommended logic: 1) Relying on nine major technology platforms to form a rich product pipeline, Wanfu's POCT market share is third in the country, and the overall gross margin has increased significantly; 2) The domestic POCT industry has been growing steadily, with a compound growth rate of 20% in the past 6 years. The market size is expected to reach 23.14 billion yuan in 2025. The policy further emphasizes POCT quality management, promotes the development of diagnosis and treatment of major diseases, and drives the rapid development of the industry; 3) Establishing domestic and international dual cycles and continuously promoting channel upgrading. The company has established three major marketing systems (domestic, international and American subsidiaries) with in-depth system management. Overseas share increased from 23% in 2018 to 49% in '22. The product line continues to introduce strategic new products overseas to promote the orderly development of localized operations.

Relying on nine major technology platforms to form a rich product pipeline, the POCT sector has the third largest market share in the country. As one of the leading enterprises in the POCT field in China, the company has nine major technology platforms (immunocolloidal gold technology platform, immunofluorescence technology platform, electrochemical technology platform, dry biochemical technology platform, chemiluminescence technology platform, molecular diagnostic technology platform, pathological diagnosis technology platform, instrument technology platform and biological raw materials platform) and six major product lines, including infectious diseases and chronic disease management centers for cerebrovascular diseases, inflammation, tumors, drug testing, and eugenics. The company's basic business is a 2B business, and has built a 2B and 2C dual-core business system. At the same time, the company strategically lays out chemiluminescence, molecular diagnosis+pathology business, and the overall product line is continuously optimized. Currently, the POCT market share is about 10% (third in the country). In addition, the cost control of the company's fluorescent and colloidal gold production lines is relatively good. The company's overall gross margin increased from 52% in '22 to 63% in 23Q1-Q3, which is a significant increase. Sales, management, and R&D expenses gradually increased to pre-pandemic levels.

The domestic POCT industry has been growing steadily, with a compound growth rate of up to 20% in the past 6 years. China's POCT industry will show a rapid development trend. The compound annual growth rate of China's POCT market is about 20% in 2018-2023, and the market size is expected to reach 23.14 billion yuan in 2025. The policy further emphasizes POCT quality management, promotes the development of diagnosis and treatment of major diseases, and drives the rapid development of the industry. In detail: 1) Chronic disease testing business: mainly includes testing for cardiovascular disease, inflammation, and tumors. The continuing rise in the incidence of cardiovascular diseases in China and the aging population are important drivers of the industry. 23H1 achieved chronic disease management and testing revenue of 720 million yuan (+40.3%). Demand for routine medical care was released centrally after the 2023H1 epidemic. There was a clear trend of in-hospital diagnosis, treatment and repair. The number of outpatient clinics and test samples at hospital terminals increased markedly compared to the same period last year. The chronic disease management business has the highest revenue share (23H1 48%) and gross profit margin (about 65%); 2) Infectious diseases: The increasing incidence of infectious diseases around the world drives the development of the industry. Currently, the market for in vitro diagnosis of infectious diseases in China is about 20 billion yuan. As the country's control of infectious diseases continues to increase, the compound growth rate is expected to reach 9.8% in 23-27. Wanfu's COVID-related infectious disease business declined significantly after the outbreak, but routine infectious disease businesses such as respiratory testing, digestive infectious disease testing, and hematologic infectious disease testing gradually resumed. The spread of 2023H1 in the country has also driven the company's sales revenue of influenza testing products to increase dramatically. In the field of respiratory infectious diseases, the company has built an integrated solution covering influenza A, influenza B, adenovirus, group A streptococcus, etc. The approval of the Mycoplasma pneumoniae test reagent further improved the company's respiratory infectious disease testing product sequence; 3) Drug testing:

The global drug abuse POCT market is about 1.1 billion US dollars, and the global drug abuse problem is still quite serious.

The company relies on US subsidiaries to carry out business sales and enhance the localized production capacity of core products in the US. 23H1 achieved drug testing revenue of 160 million yuan (+18.1%), with a steady growth rate; 4) Pregnancy and eugenics testing:

Optimize channel capabilities and strengthen partnerships with major e-commerce platforms.

Build a domestic and international dual cycle, and continue to promote channel upgrading. The company has established three major marketing systems (domestic, international and American subsidiaries) with in-depth system management. The company deepened its market development, and its overseas share increased from 23% in 2018 to 49% in '22. Thanks to the promotion of terminal sales channels, it has been sold to more than 150 countries and regions. Furthermore, the product line continues to introduce strategic new products overseas to promote localized operations. Looking at the details: 1) 23H1 infectious disease testing has increased significantly overseas; 2) overseas market demand for chronic disease management has recovered, and 23H1 has achieved rapid year-on-year growth; 3) the drug testing business continues to expand application scenarios to open up incremental space; 4) The eugenics and nurturing business is progressing steadily overseas, and product iteration is rapid.

Profit forecasting and investment advice. The company's net profit for 23-25 is estimated at 5.1, 6.5, and 770 million yuan. Considering the expansion of the industry and the company's steady growth over the next 24 and 25 years, it is recommended to pay active attention.

Risk warning: risk of exchange rate fluctuations; risk of new product development, registration and certification; risk of overseas business expansion falling short of expectations; risk of a sharp drop in product prices due to market competition.