Introduction to this report:

The performance is in line with expectations. Domestic market compliance advantages are prominent, in-hospital reagent revenue is growing rapidly, the rapid expansion of the international market accelerates market entry, and the pharmaceutical companies' circle of friends continues to grow rapidly, and it is expected that it will continue to grow rapidly. Maintain an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. Considering the amortization of equity incentive costs, the 2024-2025 EPS forecast was lowered to 0.73/0.95 yuan (originally 0.78/0.96 yuan), and the 2026 EPS forecast was 1.24 yuan. Referring to comparable company valuations, the 2024 PE 34X was given, and the target price was lowered to 24.82 yuan to maintain the shareholding increase rating.

The performance was in line with expectations. In 2023, the company achieved revenue of 1,044 million yuan (+23.91%), net profit of 261 million yuan (-0.86%), net profit of 239 million yuan (+52.21%), of which Q4 achieved revenue of 336 million yuan (+38.28%), net profit to mother of 88 million yuan (+121.68%), deducting non-net profit of 85 million yuan (+137.24%), which is in line with expectations.

Compliance advantages in the domestic market are prominent, and in-hospital reagent revenue is growing rapidly. In 2023, the company achieved domestic revenue of 785 million yuan (+23.65%), of which in-hospital test reagent revenue increased by more than 40% year on year, highlighting compliance advantages. As the oncology genetic testing industry deepens further, the company is expected to continue to benefit as a leading compliance company. In 2023, the company's MSI (microsat instability) product was approved for the first diagnosis of pan-cancer immunotherapy, and the ADX-seq200plus, a domestic high-throughput gene sequencer, was approved for marketing, and has prepared a rich LDT product line and is currently undergoing registration and approval.

The international market is expanding rapidly, and the circle of friends of pharmaceutical companies continues to grow. In 2023, the company's international sales and pharmaceutical business achieved revenue of 258 million yuan (+24.68%). The international business and BD team of nearly 70 people cooperated with more than 100 international dealers to form localized teams in key overseas markets such as Singapore, Japan, Europe, Latin America, and the Belt and Road, to further take root in the international market and accelerate overseas market entry; the company empowers clinical research with diagnosis, and the pharmaceutical company's circle of friends continues to expand, and the areas and regions of cooperation continue to expand, injecting new growth impetus into the company's long-term development.

Risk warning: New product launches and promotions fall short of expectations; risk of price reduction in product collection