1Q24 net profit grew rapidly year-on-year, and profitability continued to improve the company's 2023 operating income/net profit of net profit of 44.44/12.17/1,185 billion yuan, +0.1%/+4.3%/+5.9% YoY; 1Q24 operating revenue/net profit attributable to mother/ net profit after deduction of 10.89/3.24/314 million yuan, +5.1%/+33.2% YoY. We believe that the slowdown in revenue growth in '23 and 1Q24 was mainly due to the high COVID-19 revenue base; profit growth led the revenue growth rate mainly due to product structure optimization and the increase in revenue share of high-margin products driven by improved gross margin. We expect 24-26 EPS of 2.62/3.27/4.13 yuan. Considering the new growth drivers of the company's new product development and continuous improvement in profitability, we gave the company a PE valuation of 25x in 24 (comparable to the average PE value of 23x expected by the company Wind in 24), adjusted the target price to 65.56 yuan, and maintained the “buy” rating.
The overall cost ratio for 1Q24 decreased slightly year-on-year, and gross margin increased the company's 2023 sales/management/R&D/finance expense ratio 17.18%/4.13%/14.77%/0.20%, +1.02/+0.44/+1.97/+0.24pct, 1Q24 sales/management/ R&D/ finance ratio 16.60%/4.27%/13.88%/0.19%, +0.11pct year-on-year. The company's gross profit margin was 65.07%/64.52% in 2023/1Q24, compared with +5.23/+3.46pct. We believe that the increase in gross margin was mainly due to a further increase in the share of reagent revenue with high gross margin.
Chemiluminescence revenue grew rapidly year on year in '23, and revenue from microbial and biochemical reagents increased steadily year over year. We estimate that in '23 and 1Q24, the company's revenue from magneto-particle chemiluminescence reagents increased 20-25% and 15-20% year over year. We expect 1,200-1,300 units to be installed in 24, including 700 600-speed high-speed models. The installed volume of high-speed machines is expected to continue to increase the output of a single reagent. The revenue from microbiological detection reagents was $323 million (+18.7% yoy) in 23 years, and we estimate that 1Q24 revenue increased 15-20% year over year. The revenue from biochemical diagnostic reagents was 250 million yuan (+20.5% yoy) in 23 years, and we expect 1Q24 revenue to be basically the same as compared to the same period last year.
Overseas revenue growth rate was impressive in '23. We are optimistic that the company's overseas revenue in '23 was 209 million yuan, an increase of 60.5% over the previous year. The company's overseas business continued to expand, and the installed volume of chemiluminescence instruments continued to be released, driving reagent revenue growth. We are optimistic that overseas will maintain a rapid growth trend for 24 years, and that the share of overseas revenue contributed will continue to increase.
Leading domestic IVD company maintains “buy” rating
We expect the company's net profit to be 15.4/19.2/2.42 billion yuan in 24-26, up 26.3%/24.8%/26.2% year-on-year. The current stock price corresponds to the 24-26 PE valuation of 20x/16x/13x. We adjusted the target price to 65.56 yuan (previous value of 55.40 yuan) to maintain the “buy” rating.
Risk warning: hospital installations fell short of expectations; project fee reductions exceeded expectations; domestic brand competition intensified.