Incident: 2023 revenue of 587 million yuan (-16.86%, same below; revenue excluding beads for nucleic acid testing decreased by 7.59% year on year), net profit to mother of 0.69 million yuan (-75.08%, net profit to mother of 162 million yuan after excluding amortization of share payment expenses and 22-year investment income, 41.90% year on year), net profit of non-attributable net profit of 32 million yuan (-83.97%, after excluding the impact on net profit attributable to mother), was 125 million yuan, or -50.46% year on year). 2024Q1's revenue was 154 million yuan (+16.64%, excluding the impact of Fuli Instruments in March, +6.1% year over year), net profit attributable to mother was 16.89 million yuan (+36.66%), net profit of 13.53 million yuan (+126.08%) after deducting non-return to mother net profit of 13.53 million yuan (+126.08%).

Low performance in 2023, 2024Q1 profit exceeded expectations: Looking at the 2023 business segment, biomedical revenue was 545 million yuan (-7.65%, accounting for 92.8% of revenue), of which chromatographic fillers and chromatography media revenue was 409 million yuan (-9.52%), and sales revenue of 257 million yuan used in formal production or phase III clinical projects by pharmaceutical companies, accounting for 62.84% (+4.4pct) of 2023 filler and media revenue. Chromatography media revenue for four types of macromolecular drug projects, including antibodies (including ADC), recombinant proteins, vaccines, and nucleic acid drugs, was 250 million yuan (-14.4%), and 14 new phase III antibody projects were added in 23 years; the revenue of fillers used for four types of small to medium molecule drugs, including insulin, peptides, antibiotics, and contrast agents, was 142 million yuan (+26.5%), mainly due to the company's full range of solution products. The revenue of chromatographic fillers for peptides was 0.67 million yuan (+96.4%). The revenue of the protein chromatography system and accessories business was 59.68 million yuan (-25.73%), mainly due to the decline in investment and financing affecting customer R&D needs, reducing equipment procurement and increasing competition; liquid chromatography columns and sample pretreatment products generated revenue of 58.06 million yuan (+26.93%), mainly because the company's chromatographic analysis consumables have strong market competitiveness. In 2024, the revenue of chromatographic fillers and chromatography media was +11.1% year-on-year, and the analytical consumables business continued to grow at a high rate of +27.3%; the protein chromatography instrument business still experienced a sharp year-on-year decline.

The return of positive growth in the company's operating income and the year-on-year decline in share payments led to a marked improvement in profit indicators. The 2024Q1 profit growth rate exceeded expectations.

Looking forward to the future, we believe that the increase in the company's performance is mainly reflected in: ① In 2023, the company's revenue from peptide chromatographic fillers, including GLP-1, was +96.4%. As the market sentiment of diet pills increases, domestic GLP-1 formulation manufacturers must consider competition after product launch and prefer cost-effective domestic fillers. Nano-silicone products are highly competitive; ② The company has introduced several phase II/III antibody projects introduced in previous years, which is expected to usher in repeated procurement of larger projects; ③ The company will continue to increase R&D investment in 2023 Annual R&D expenses were +38.07%, and various iterative innovative products such as anti-A & anti-B affinity chromatography media for blood product purification were launched and sold, leading to increased performance; ④ The company strengthened sales construction and internal integration, and signed strategic cooperation agreements with key customers. The sales amount from contracted customers in 2023 was 170 million yuan, accounting for 42% of the filling business revenue; in addition, the company's internal organizational structure continued to be optimized, integrating instruments and filling teams, and operating efficiency improved markedly.

Profit forecast and investment rating: Considering the weak downstream demand of the company, we adjusted the company's 2024-2025 revenue from 11.53 billion yuan to 9.46/1,176 million yuan, and the estimated revenue for 2026 to be 1.41 billion yuan; adjusted the company's net profit to mother from 266/ 387 million yuan to 183/288 million yuan. The estimated net profit to the mother in 2026 is 376 million yuan. The PE corresponding to the current stock price is 46/29/22×, respectively, maintaining the “buy” rating.

Risk warning: demand continues to decline, market competition intensifies, new product market expansion falls short of expectations, etc.