Key points of investment

Incident: On April 27, 2024, the company released the 2023 Annual Report & 2024 First Quarter Report, with 2023 revenue of 1,286 billion yuan (-64.0%, YoY in parentheses, same below), net profit attributable to mother - 70.96 million yuan, net profit not attributable to mother - 193 million yuan; 2024Q1 revenue of 302 million yuan (-0.21%), net profit attributable to mother of 5.22 million yuan, net profit of non-return to mother of 15.95 million yuan.

The regular business maintained rapid growth, and profits continued to improve: the decline in the company's revenue was mainly due to a sharp decline in demand for testing raw materials and terminal products related to public health prevention and control. Regular business revenue in 2023 was 1,252 billion yuan (+23.5%), and the regular business maintained a high growth trend; since a small number of public health prevention and control products were sold in 2023Q1, according to our estimates, the 2024Q1 routine business growth rate was about 13%. The decline in the company's profit is mainly due to the decline in revenue while the number of personnel and various expenses are still high, but since 2023Q3, the company has achieved a positive net profit return to mother in a single quarter and continued to improve.

We believe that the company's business highlights and future highlights are: ① Consolidate R&D investment and achieve great results: the company invested 340 million yuan (+15.2%, R&D cost rate 26.3%) in 2023, with a total R&D investment of 965 million yuan in the past three years, and a large number of new products were launched in the life science, in vitro diagnosis, and biomedicine divisions. While the company's leading domestic position of molecular reagents was further stabilized, new products brought new volume; ② Accelerated expansion of overseas business, opening up room for long-term growth: 2023 will be the first year for the company to develop overseas business, achieving 4563 million yuan 10,000 yuan in revenue, 2024Q1 revenue of 16.63 million yuan. The company already has 140 overseas employees, and has completed warehousing construction in the US, Hungary and Singapore. The number of new customers in 2023 will account for more than 80%, and overseas sales will be further expanded in 2024; ③ AD blood test and respiratory testing products are expected to be rapidly released: The company completed the development of 6 testing indicators for Alzheimer's disease in April 2024 and obtained medical device registration certificates. Many of these indicators are exclusive in China. As AD antibody drugs enter the Chinese market, the demand for AD blood screening is released, the company relied on The first-mover advantage is expected to quickly seize the market; at the same time, the overall automation solution for infection screening and respiratory pathogen detection with Mindray Healthcare is also expected to expand further; ④ The business types continue to be rich, and the prototype of a platform-based company is gradually showing: since its establishment, the company has always focused on horizontal expansion of the business, and has now formed a stable business - life science, growth business - in vitro diagnosis, biomedicine, exploratory business - laboratory supplies, microfluidic control platforms, laboratory instruments, animal quarantine terminal reagents, etc. The diversified business will help the company continue to expand its growth space, and the prototype of a platform-based company is gradually showing.

Profit forecast and investment rating: Due to disturbances in public health prevention and control and changes in the company's downstream demand, we adjusted the company's 2024-2025 revenue from 19.81/2,741 billion yuan to 1,598/1,982 billion yuan, estimated net profit of 2026 billion yuan, adjusted net profit from 500/740 million yuan to 138/366 million yuan, and estimated net profit to mother of 465 million yuan. The current stock price corresponds to PE 71/31/24 ×, respectively, considering that the company is a leader in molecular reagents and It has multiple growth lines and maintains a “buy” rating.

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