Revenue surpassed 1 billion for the first time, and the leading position in the hospital market is stable. 2023 revenue of $1,044 million (+23.91%), net profit attributable to mother of $261 million (-0.86%), net profit of non-return to mother of $239 million (+52.21%). Among them, fourth-quarter revenue was $336 million (+38.31%), and net profit to mother was $88 million (+118.64%). The company continued to expand the in-hospital market through compliance admissions, and at the same time accelerated the development of the international market to achieve contrarian growth. Net profit after deduction reached a record high, and its leading position in the industry became more stable.

Testing is rapidly shifting to in-hospital, domestic and international two-wheel drive. In terms of business, in 2023, revenue from test reagents was 860 million (+40.64%), and revenue from testing services was 85 million (-37.09%). It has shown a clear trend of returning in-hospital testing, amplifying the company's advantage of compliant admissions; revenue from drug clinical research services is 89 million yuan (+3.10%). According to the management perspective, domestic sales of 785 million yuan (+23.65%), of which in-hospital test reagent revenue increased by more than 40%, and the in-hospital share further increased; international sales and pharmaceutical companies' business revenue of 258 million (+24.68%), international business and BD teams of nearly 70 people, cooperated with more than 100 international dealers, had wholly-owned subsidiaries in Singapore, Hong Kong and Canada, and European logistics centers in the Netherlands. Localization teams were set up in key overseas countries to help the global layout take the global layout to the next level.

Gross profit margin has been rising steadily, and the scale effect continues to be prominent in the new industry environment. The gross margin for 2023 was 83.97% (+1.52pp). By business, the gross profit margin for test reagents was 90.6% (+0.8pp), which remained stable; the gross profit margin for testing services was 36.1% (-23.9pp), and the gross profit margin for drug clinical research services was 70.8% (-2.2pp). Sales expense ratio 31.58% (-4.50pp), management expense ratio 6.21% (-1.18pp), R&D expense ratio 19.47% (-1.25pp), financial expenses ratio -2.48%, net profit margin after deduction 22.90% (+4.26pp). Net operating cash flow in 2023 was 299 million (+100.43%), with a ratio of 114% to net profit attributable to mother. The cash flow situation is good.

Investment advice: slightly raise the 2024-2025 profit forecast and add the 2026 profit forecast. The estimated net profit for 2024-2025 is 326/4.05/495 million yuan (2024-25 was 319/396 million), an increase of 24.8%/24.1%/22.3% year-on-year, and the current stock price corresponds to 26/21/17 times PE. Ed Biotech is a leading enterprise in the field of accurate tumor diagnosis. It has built a comprehensive companion diagnostic product system from targeted therapy to immunotherapy. It is expected to share the dividends of the times for precise tumor treatment. At the same time, the products will successfully go overseas, accelerate the development of international markets, have broad scope for medium- to long-term development, and maintain a “buy” rating.

Risk warning: risk of price reduction in collection; risk of overseas sales and promotion; geopolitical risk; risk of market competition; product development falling short of expectations.