The impact of COVID-19 is expected to clear up, and the company is expected to enter a continuous growth channel. In 2023, the company achieved operating income of 13.408 billion yuan, a year-on-year decrease of 33.89%; realized net profit to mother of 307 million yuan, a year-on-year decrease of 78.56%. The company's apparent performance was under pressure due to the high COVID-19 business base for the same period in 2022 and the impairment accrual of related accounts receivable.
However, in 2023, the company continued to improve its governance system, improve its business development capabilities, strengthen accounts receivable management, and achieve continuous improvement in operating cash flow throughout the year. At the end of 2023, the company's net cash flow from operating activities was 1,921 billion yuan, an increase of 17.20% over the previous year. The company is expected to enter a continuous growth channel as the effects of COVID-19 etc. are basically cleared up in the future.
Intensive cultivation throughout the country, piloting overseas, and steady development of routine diagnostic service business. By business, the company's diagnostic service business achieved revenue of 5.187 billion yuan in 2023, excluding the impact of COVID-19, an increase of 11.91% year-on-year over the same caliber last year. Among them, ICL achieved revenue of 4.718 billion yuan, a year-on-year increase of 16.73% over the same caliber last year.
In 2023, the company continued to break through in domestic business, opening 1,023 new testing projects, adding 238 new tertiary hospital customers, and increasing the revenue share of tertiary hospitals to 32.8%. At the same time, the company further expanded the “cooperative co-construction” business model, adding 46 new co-built laboratories, and built nearly 700 laboratories together, and revenue increased 26% year-on-year. Second, in 2023, the company is preparing to build China's first overseas ICL laboratory in Vietnam, taking the first step in going overseas. Overseas markets are expected to bring new impetus for growth.
The diagnostic product business continues to expand, and the advantages of the “R&D, production, marketing and inspection” integrated industrial chain are highlighted. In 2023, the company's channel product business developed steadily, achieving revenue of 8.283 billion yuan, an increase of 5.32% over the previous year. Second, the company's self-produced products continued to be certified, adding 3 Class III certificates, 7 Class II certificates, and 180 Class I certificates, achieving a total revenue of 403 million yuan. Overall, the company continues to expand its endogenous high-growth value chain based on technological and institutional innovation. Upstream, the company has now completed the layout of three major production lines, with highly competitive products in the fields of liquid phase mass spectrometry, nucleic acid mass spectrometry, molecular diagnosis and cytopathology; in the midstream, the company's routine diagnostic service business is developing steadily; downstream, the company is actively developing physical examination services and “Xiaofei Test” online 2C home testing, which is conducive to opening up the incremental market. At present, the company has initially completed a unique integrated and in-depth industrial chain layout, with outstanding long-term competitive advantages.
According to the 2023 annual report, we lowered the revenue growth rate of diagnostic services and diagnostic products, and adjusted the company's EPS for 2024-2026 to 1.25/1.58/1.99 yuan, respectively (the original forecast was 1.92/2.40 yuan for 24-25). According to comparable companies, the corresponding target price was 20.00 yuan, maintaining a “buy” rating, with 16 times PE in 24 years.
Risk warning
The ICL industry undertakes the risk that the amount of outsourcing falls short of expectations; the risk that the profitability of channel products falls short of expectations; the profit level of precision centers falls short of expectations; and the risk of asset and credit impairment losses.