Event: Innote released its 2023 annual report and quarterly report for the first quarter of 2024. The results are in line with expectations
In 2023, the company achieved operating income of 478 million yuan, up 7.03% year on year; net profit to mother of 174 million yuan, up 15.44% year on year; net operating cash flow of 260 million yuan, up 105.53% year on year. In terms of profit margin, the company's comprehensive gross profit margin and net margin increased to 75.98% and 36.39% respectively in 2023. Excluding the effects of asset and credit impairment, the company's net profit after deducting assets and credit impairment was 196 million yuan, and the net profit margin after dividing total revenue reached 41.10%. Focusing on the main business, the company's non-COVID-19 respiratory products achieved sales revenue of 405 million yuan, a year-on-year increase of 246.17%; the gross profit margin of the business was 83.06%, a year-on-year decrease of 1.40 percentage points; the average product price was 16.46 yuan/person, down 6.09% year on year, which is expected to be related to an increase in the share of revenue for the three joint lung tests.
In the first quarter of 2024, the company achieved operating income of 282 million yuan, an increase of 109.36% year on year; net profit to mother was 146 million yuan, an increase of 171.44% year on year. In terms of profit margin, the company's comprehensive gross profit margin and net margin increased to 83.55% and 51.87% respectively in the first quarter of 2024. The total amount of credit impairment losses and asset impairment losses calculated by the company in the first quarter was 19.3848 million yuan, mainly due to impairment of accounts receivable related to COVID-19 products. Excluding this impact, the company's net profit to mother reached 165 million yuan, and the net profit margin after dividing total revenue reached 58.76%. It has reached a record high for non-COVID-19 businesses, and the logic of increasing profit margins brought about by the scale effect has been confirmed.
Actively lay out overseas business and build a second development engine
The company attaches great importance to overseas markets, set up a wholly-owned subsidiary in Singapore as the headquarters for future international market development, and uses the Southeast Asian market as the company's entry point to the international market to replicate the successful domestic professional marketing strategy. In 2023, the company's quadruple tests for influenza A and B, RSV, metapulmonary virus, and the five joint tests for pulmonary bronchoves/RSV/adenovirus/Coxsackie virus group B were all approved overseas. Overseas clinical trials and registration of products such as the novel A and B antigen triplet and RSB/adenovirus/metapovirus/parainfluenza virus antigen quadruple are also being promoted. Benefiting from various new products launched by the company in overseas markets such as Thailand, the company achieved overseas revenue of 13.5591 million yuan, and revenue of 127.17,400 yuan after excluding the COVID-19 business, an increase of 272.16% over the previous year, showing a good development trend.
We believe that the infectious disease testing needs, medical infrastructure level, and patients' ability to pay in Southeast Asia are similar to those in China, and that respiratory POCT joint testing products can better improve the local level of infectious disease diagnosis and treatment. The company took the lead in going overseas, and product registration and channel establishment are in the beginning, and it is expected that product sales will continue to grow rapidly.
Demand and policy drive the boom in the respiratory pathogen testing industry. Demand level: Since the beginning of 2024, respiratory pathogen testing has maintained a high level of prosperity. According to data from the National Influenza Center, from the beginning of 2024 to March 24, 2024, the National Influenza Surveillance Network laboratory tested a total of 131,300 influenza-like case surveillance specimens, which is higher than the same period in 2023 (119,500).
Policy level: The National Health and Health Commission has issued several documents clarifying the need for pathogen testing and joint inspection. In February 2024, the National Health and Health Commission issued the “National Health Care Quality and Safety Improvement Target (2024)”, which clearly calls for improving the assessment rate of the severity of cases of patients with acquired pneumonia in the inpatient community, the positive influenza etiological diagnosis rate before the use of anti-influenza virus drugs, and the etiological examination rate of hospitalized patients before antimicrobial drug treatment.
In March 2024, the National Center for Infectious Disease Quality Control (led by the Health and Health Commission) issued the “Fever Clinic Patient Consultation Guidelines”, which require laboratory testing capabilities of medical institutions: “Medical institutions should configure antigen testing and antigen multi-joint testing programs for various pathogens based on the characteristics of infectious disease prevalence.” , “Level 2 and above general hospitals, hospitals specializing in infectious diseases, children's hospitals, and traditional Chinese medicine hospitals should have rapid detection capabilities for common respiratory infection pathogens, and specialist hospitals such as maternal and child health hospitals, cancer hospitals, and fever sentinels in township hospitals and community health service centers should have antigen testing capabilities for common respiratory infection pathogens.
It is recommended that medical institutions that are in a position to do so carry out immediate testing and multiple joint testing programs for the common pathogens mentioned above in order to further improve testing efficiency.” Investment recommendations:
We expect the company's revenue to increase by 37.2%, 53.4%, and 42.5% year-on-year respectively in 2024-2026; net profit to mother will increase by 64.8%, 47.9%, and 39.8%, respectively, with outstanding growth; maintain the investment rating given to Buy-A, and the target price for 6 months is 42.13 yuan, which is equivalent to a dynamic price-earnings ratio of 20 times that of 2024.
Risk warning:
Risks that assumptions and predictions fall short of expectations; risk that market demand for respiratory pathogen detection products falls short of expectations; risk that the listing process of the company's research projects falls short of expectations; and risk of further intensification of industry competition.