1Q24 revenue grew steadily year on year, and high cost investment affected profit growth

The company's 2023 operating revenue/net profit after deduction of net profit of 5.44/1.54/140 million yuan, YoY +14.6%/-23.4%; 1Q24 operating revenue/net profit to mother/ net profit after deduction of 1.46/0.31/30 billion yuan, +6.7%/-31.9%/-32.1% YoY. We believe that the sharp year-on-year decline in revenue from the COVID-19 business led to a year-on-year slowdown in revenue growth. The profit growth rate was mainly pressured by the year-on-year increase in company expenses, preparation for bad debts accruing accounts receivable, preparation for falling inventory prices, etc., and we are optimistic that profits will resume steady growth in 24 years. We expect EPS of 1.40/1.71/2.08 yuan in 24-26 years. Considering the continued high growth in the company's regular business revenue, we gave the company a PE valuation of 39x in 24 years (comparable to the company's 24-year average expectation of 35x), corresponding to a target price of 54.68 yuan, maintaining a “buy” rating.

The 1Q24 sales and R&D expense ratio increased significantly year-on-year, and the gross margin slightly increased the company's 2023 sales/management/R&D/finance expense ratio of 30.83%/15.51%/22.98%/-11.52% year-on-year, +7.15/+0.44/ -1.02/-0.25pct, 1Q24 sales/management/ R&D/ finance expense ratio 32.44%/15.87%/25.23%/-9.86% year-on-year, +7.28/+1.63/+4.20/-2.45pct. 1Q24 continues to increase sales and R&D investment. 2023/1Q24 gross profit margin 91.26%/92.58%, -1.24/+1.53pct year-on-year.

Domestic non-COVID-19 revenue grew steadily in '23, and the growth rate of overseas non-COVID-19 revenue was impressive. In '23, the company's non-COVID-19 and COVID-19 revenue was 499/45 million yuan respectively, +29.5%/-49.5% over the same period last year.

Among them, the company's overseas non-COVID-19 business revenue in '23 was 330 million yuan, up 37.1% year on year; domestic non-COVID-19 business revenue was 169 million yuan, up 16.8% year on year. The 1Q24 company's non-COVID-19 revenue was 138 million yuan, +16.0% year-on-year. We are optimistic that domestic revenue is expected to resume rapid growth as domestic demand continues to recover.

Revenue in America, Europe and the Asia-Pacific region all grew rapidly year on year in '23. The overseas layout continued to deepen. In '23, the company established a number of new overseas subsidiaries in Europe, Japan and other places. Currently, the sales network has covered major countries and regions such as North America, Asia Pacific and Europe, and the global layout continues to improve, driving the rapid growth of overseas conventional business revenue. Among them, regular business revenue in the Americas in '23 was 229 million yuan, +29.8% year on year; regular business revenue in Europe was 72 million yuan, +69.5% year over year; Asia Pacific (excluding domestic) regular business revenue was 29 million yuan, +33.3% year over year.

Domestic biological reagent leaders that focus on serving the innovative drug industry chain and maintain the “buy” rating. We expect the company's net profit to be 1.68/2.05/250 million yuan in 24-26, up 9.5%/21.9%/22.0% year on year. The current stock price corresponds to the 24-26 PE valuation of 27x/22x/18x. We adjusted the target price to 54.68 yuan (previous value 77.88 yuan) to maintain the “buy” rating.

Risk warning: products cannot meet market demand; market competition intensifies; overseas development falls short of expectations.