The 2023 results are in line with market expectations, and the 1Q24 profit side slightly exceeded market expectations. The company announced 2023 results: revenue of 4.444 billion yuan, which is basically the same as the previous year; net profit to mother of 1,217 billion yuan (YoY+ 4.3%) is in line with market expectations. The company announced 1Q24 results: revenue of 1,089 million yuan (YoY +5.1%), net profit to mother of 324 million yuan (YoY +33.9%). Profit margins slightly exceeded market expectations, mainly due to increased gross margin due to changes in sales structure.
Development trends
The self-produced reagent business grew steadily throughout 2023. According to the announcement, by product, the company achieved reagent revenue of 3.815 billion yuan (YOY +8.1%) and a gross profit margin of 70.9% (YOY+4.4ppt) in 2023. Among them, immunoassay reagents were 2,483 million yuan (YoY +23.8%), gross profit margin 80.1% (YOY+1.6ppt); microbiological testing was 323 million yuan (YoY +18.7%), gross profit margin 45.1% (same year on year); biochemical testing was 250 million yuan (YoY +20.5%), gross profit margin 63.4% (YOY+4.6ppt). Instrument revenue of 482 million yuan (YoY -33.0%) was achieved in 2023, of which self-produced instruments were 302 million yuan (YoY -30.5%). We believe that the main reason for the decline was the high base figure brought about by nucleic acid instrument shipments in 2022. In addition, the company's overseas business also achieved rapid growth in 2023, with annual revenue of 209 million yuan, an increase of 60.5% over the previous year.
1Q24 The company's profitability improved. According to the announcement, 1Q24's comprehensive gross profit margin was 64.5% (YOY+3.5ppt). From the cost side, 1Q24 sales expense ratio was 16.6% (YOY+0.2ppt), management expense ratio 4.3% (YOY-0.2ppt), and R&D expense ratio 13.9% (YOY-0.8ppt). Overall cost side usage efficiency improved. The 1Q24 company achieved net profit of 324 million yuan, corresponding to a net interest rate of 29.8%, an increase of 6.4 ppt over the previous year, and an increase in profitability.
Repurchase and cancel shares, and increase dividends to positively return shareholders. According to the company announcement, on April 17, 2024, the company held a board of directors meeting to change the use of the shares repurchased from equity incentives to cancellation (still subject to review and approval by the shareholders' meeting); at the same time, the company announced the 2023 profit distribution plan announcement. Each A share paid a cash dividend of 1.05 yuan (tax included, corresponding cash dividend ratio of 50.01%), and the total cash dividend increased by 31.0% year on year; the company achieved operating cash flow of 1,470 billion yuan (YoY) as of the end of the 1Q24 period +47.9%).
Profit forecasting and valuation
The net profit forecast for 2024 remains unchanged at 1,545 million yuan, and the net profit introduced in 2025 is 1,908 billion yuan. The current stock price corresponds to the 2024/2025 price-earnings ratio of 20.6 times/16.7 times. Maintaining an outperforming industry rating, considering the recent slight increase in the sector's valuation center, we raised our target price by 10.0% to 62.54 yuan, which corresponds to 23.7 times the 2024 price-earnings ratio and 19.2 times the 2025 price-earnings ratio. There is 15.2% upside compared to the current stock price.
risks
Risk of price reduction in collection; increased risk of competition; risk of overseas business.