Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 463 million yuan, a year-on-year decrease of 24.06%, and net profit to mother of 34.79 million yuan, a year-on-year decrease of 60.34%, after deducting non-net profit of 31.78 million yuan, a year-on-year decrease of 57.90%.
On a quarterly basis, in the fourth quarter of 2023, the company achieved operating income of 133 million yuan, a year-on-year increase of 3.03%, and net profit to mother of 121 million yuan, an increase of 887.20% year-on-year, after deducting non-net profit of 0.2 million yuan, an increase of 560.20% over the previous year. Along with the gradual recovery of downstream demand, the company's scientific research consumables business gradually returned to normal. Earnings in a single quarter grew steadily, and the profit side achieved explosive growth due to the impact of the low base during the same period in 2022/Q4.
Factors such as reduced revenue and increased depreciation investment affect short-term profit margins. In 2023, the company's operating performance declined. The company's profitability fluctuated due to factors such as depreciation of the new plant and vigorous sales and promotion activities, which led to an increase in related costs. In 2023, the company's sales expenses ratio was 6.52%, up 2.39 pp from the same period last year, and the management expense ratio was 6.08%, 0.94 pp higher than the same period last year, 6.16% higher than the same period last year, 0.03 pp higher, financial expenses ratio 1.10%, and 2.28 pp higher than the previous year. In 2023, the company's gross profit margin was 30.62%, down 1.22pp year on year, net profit margin 7.58%, down 6.80pp year on year.
Performance declined due to adverse effects such as geopolitics, inventory digestion, and production capacity clearance, and 2024 is expected to usher in healthy growth.
In 2023, due to external factors such as the downturn in the global economic cycle, geographical conflicts, and strong interest rate hikes in the US dollar, overseas markets faced some uncertainty. At the same time, due to the inventory digestion of downstream dealers and customers not over, the industry was still in the production capacity clearance stage. Overall product prices declined, and the growth rate of several of the company's businesses slowed down. By product, the company's revenue from biological culture products in 2023 was 157 million yuan, down 2.63% year on year. Among them, products such as cell culture bottles and cell culture dishes continued to grow. Revenue from liquid treatment products was 274 million yuan, down 33.51% year on year, and liquid treatment products declined significantly, mainly affected by the base of epidemic-related products such as suction tips, pipettes, and cryopreservation tubes; by region, the company's domestic sales revenue in 2023 was 165 million yuan, down 20.04% year on year.
In 2024, with the gradual easing of the domestic and international situation and the end of production capacity clearance, we expect downstream demand to gradually recover, and the company's performance is expected to usher in positive changes.
Intelligent manufacturing projects are gradually being implemented, and domestic and foreign markets are expanding at an accelerated pace. In 2023, we will focus on promoting the implementation of intelligent upgrading of production lines, introducing high-end automation equipment for some best-selling products, and pioneering the construction of automated production lines in the industry. The main intelligent warehousing building has been completed and inspected, greatly improving production efficiency and product stability. At the same time, three-dimensional warehouses have also been partially put into use, which is expected to significantly optimize warehousing and logistics efficiency; on the marketing side, the company will continue to broaden the sales network layout and set up 5 new offices in the domestic market in 2023. It is expected to actively enhance the localization of the company's products to domestic customers. Penetration rate: For overseas markets, the company continues to improve marketing channel construction. It has already set up a subsidiary in the US for initial distribution, and plans to promote its own brand internationally with Germany as the center in Europe. It is expected to accelerate the increase in overseas market share in the future.
Profit forecast and investment suggestions: According to the announcement data, we adjusted the profit forecast. It is expected that with the gradual improvement of downstream demand, the company's business is expected to experience a moderate recovery. Equipment depreciation, sales promotion, etc. may disrupt short-term profits. It is expected that in 2024-2026, the company will achieve operating income of 5.39, 6.34 billion yuan, and 746 million yuan, up 16%, 18% year-on-year (6.46 billion yuan and 834 million yuan before 24-25). The company is expected to achieve net profit of 0.56, 0.69, and 0.86 in 2024-2026 100 million yuan, a year-on-year increase of 61%, 23%, and 24% (0.98 million yuan and 124 million yuan before adjustment). The company's current stock price corresponds to 25, 20, and 16 times PE in 2024-2026. Considering that the company is a leader in the domestic research consumables industry, has significant competitive advantages, abundant order reserves, and is expected to continue to maintain a high growth trend in the future, we maintain a “buy” rating.
Risk warning events: Risk of new product development, risk of increased market competition, risk of information being delayed or not updated in a timely manner in public information used in research reports.