Introduction to this report:

The third-party testing business continues to be deployed nationwide, and the laboratory gradually reaches production to drive revenue growth. New mass spectrometers and electron microscopy products have been applied downstream, and the sales volume of high-end scientific instruments is worth looking forward to.

Key points of investment:

Maintain an “Overweight” rating. We maintain the company's projected net profit for 2024-2025 and increase 2026 at 1.72, 1.94 million yuan, and 244 million yuan, respectively, and corresponding EPS of 0.45, 0.51, and 0.64 yuan, respectively.

The company's third-party testing nationwide layout continues to advance and upgrade to a high-barrier national engineering materials evaluation service. Sales of basic testing instruments continue to grow, high-end scientific instruments continue to develop new products, and mass spectrometers and electron microscopy have achieved downstream applications. Maintain the target price of 16.62 yuan and maintain the “Overweight” rating.

Third-party testing laboratories gradually reached production to drive revenue growth, and the performance was basically in line with expectations. 1) In 2023, the company achieved operating income of 950 million yuan, a year-on-year increase of 16%; net profit to mother of 126 million yuan, an increase of 10%; net profit after deducting non-return to mother of 103 million yuan, an increase of 28% over the previous year. 2) In 2023, the third-party testing business achieved revenue of 483 million yuan, an increase of 25% over the previous year, driving the company's revenue growth.

The company's testing division continues to advance the national layout: ① Chengdu, Kunshan and Qingdao laboratories have reached production; ② Deyang, Xi'an, and Zhuzhou have completed preliminary renovation work; ③ Zhuozhou has completed the signing of equipment contracts.

Analytical instruments: The number of ICP spectrometers sold at a record high, and new mass spectrometers and electron microscopy products have been recognized by downstream customers. 1) The sales volume of the company's direct reading spectrometers, gas element analyzers, and ICP spectrometers all hit new highs in the company. The spark direct reading spectrometer has been selected and certified as a single champion product by the Ministry of Industry and Information Technology. 2) The ICP mass spectrometer PlasMams 400 and field emission electron microscope FE-1050 have achieved downstream practical applications.

Equity incentives entered the assessment year, and the target “14th Five-Year Plan” net profit compound growth was over 17%. The company's first batch of equity incentive plans, based on 2020, has a target net profit compound growth rate of not less than 17% for the 2024 assessment year, and reserves to grant a portion of the 2025 assessment target net profit compound growth rate of not less than 17%. Equity incentives are benchmarked against performance assessments, and the target is a compound growth of over 17% in the “14th Five-Year Plan”.

Risk warning: the risk of technology iteration, the risk of changes in subsidy policies.