Key points of investment
Performance Overview:
In 2023, the company achieved operating income of 1,104 billion yuan, a year-on-year decrease of 80.27%; net profit to mother was 140 million yuan, a year-on-year decrease of -91.86%; net profit after deducting non-return to mother was 113 million yuan, a year-on-year decrease of 93.47%.
With 2024Q1, the company achieved operating income of 183 million yuan, a year-on-year decrease of 39.4%; net profit due to mother was 14.35 million yuan, a decrease of 122.0% year on year; net profit after deducted from mother was -15.96 million yuan, a decrease of 126.6% year on year.
Growth capacity: The COVID-19 testing base is gradually being cleared, and HPV's position is stable. In 2023, the company's regular business revenue excluding emergency public health service testing products and services was 889 million yuan: of these, the product side achieved revenue of 681 million yuan, an increase of 1.13% year on year, and medical testing services achieved revenue of 208 million yuan, an increase of 8.82% year on year.
HPV testing: In 2023, Anhui Province led IVD collection in 25 provinces. Kepu Chemical participated in the above collection and bidding process and successfully entered Group A. Volume: According to the annual procurement demand reported by various medical institutions according to the “Procurement Notice”, Kepu Chemical ranked first with 3.37 million servings, accounting for 24.17% of the total annual demand of medical institutions in the provinces participating in the collection, further confirming the company's leading position in the field of HPV testing. Price: A total of 4 HPV testing products participated in the bidding. The winning bid price was the highest price of all the winning manufacturers and products. Winning the bid will help the company maintain its competitive advantage in the 25 allied provinces (regions, corps) markets and lay the foundation for further expanding its market share. Screening: The company's KEP HPV12+2 product specially developed for large-scale cervical cancer screening was first approved by the National Drug Administration in June 2023 for intended use in cervical cancer screening. At the same time, in 2023, the company successfully won bids for two cancer screening projects or HPV reagent procurement projects in Chengdu, Zhuhai, Xiamen, Ordos, and parts of Gansu, Jiangxi, and Guizhou. Among them, in 8 prefecture-level cities in Guizhou Province that have open tenders for screening for two cancers, all companies won bids.
Other tests: In 2023, the company's genetic testing products for poverty were used about 3.5 million times, genetic testing products for deafness were used about 2.6 million times, and STD series testing products were used about 3.5 million times. We believe that excluding the impact on revenue related to COVID-19 testing, the company's regular business maintained a relatively healthy steady growth state. Considering the company's absolute leading edge in the HPV field, the excellent HPV test results in the collection of in vitro diagnostics in 25 provinces, and the increase brought about by the company's various new products being launched one after another, looking ahead to 2024-2026, the company's revenue and profit are expected to maintain a steady growth trend.
Profitability: Gross profit margin and net profit margin are expected to gradually rise
Gross margin and net profit margin: In 2023, the company's gross sales margin was 61.03%, a year-on-year decrease of 8.34pct, and the net sales margin was 6.20%, a year-on-year decrease of 25.98pct. This is mainly due to a sharp year-on-year decline in gross margin related to COVID-19 testing. Expense rate for the period: The company's sales expense ratio was 25.27%, up 17.05 pct year on year, management expense ratio was 22.94%, up 16.02 pct year on year, and R&D expenses rate was 12.34%, up 7.92 pct year on year, mainly due to a sharp decrease in COVID-19 business revenue. Looking ahead to 2024, we expect gross margin and net profit margin to continue to rise as the company's expense ratio stabilizes after the COVID-19 testing-related base is cleared.
Operating quality: In 2023, the company's net operating cash flow was 320 million yuan, a year-on-year decrease of 75.59%, accounting for 4753.27% of the net income from operating activities. The net cash flow from operating activities in 2023 greatly exceeded the net profit for the year, mainly due to the company's increased collection of receivables, and the amount recovered was greater than the operating income.
Profit Forecast and Valuation:
Combined with the company's leading position in the HPV testing field and the product volume brought about by the launch of many new products, we expect the company's EPS to be 0.17, 0.21, and 0.27 yuan in 2024-2026, and the current stock price is 37.0 times PE in 2024, maintaining a “buy” rating.
Risk warning:
The risk of new product promotion falling short of expectations, the risk of increasingly fierce market competition, and the risk of policy changes.