Key points:
Revenue fell 33.89% year on year, and net profit after deducting non-return to mother fell 81.90% year on year incident: Recently, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 13.408 billion yuan, a year-on-year decrease of 33.89%. The year-on-year decline in revenue was mainly due to a sharp decline in the company's COVID-19 business revenue compared to the same period in '22. Net profit to mother was 307 million yuan, down 78.56% year on year, and net profit without return to mother was 295 million yuan, a year-on-year decrease of 81.90%. 2023Q4 achieved operating income of 3.116 billion yuan, a year-on-year decrease of 33.03%, net profit to mother of 223 million yuan, a year-on-year decrease of 77.51%, after deducting non-net profit of 187 million yuan, a year-on-year decrease of 76.09%.
2024Q1 achieved operating income of 2,973 billion yuan, a year-on-year decrease of 8.01%, net profit to mother of 0.23 million yuan, a year-on-year decrease of 85.54%, after deducting non-net profit of 0.24 million yuan, a year-on-year decrease of 83.01%.
The cost ratio has increased. The gross margin decreased significantly due to the decline in revenue from diagnostic services. The management expense ratio was 7.06%, up 0.81 pct year on year; the financial expense ratio was 1.65%, up 0.17 pct year on year, and the sales expense ratio was 10.32%, up 2.44 pct year on year. The company invested 436 million yuan in R&D throughout the year, down 31.98% year on year. The absolute value of the company's expenses dropped sharply during the period, but the cost rate increased, mainly due to the decline in demand for COVID-19 antigens and the reduction in marketing expenses, but the corresponding sharp drop in revenue also led to an increase in the cost ratio. At the same time, the company continued to increase investment in innovative R&D, which led to an increase in R&D expenses. The company's gross margin in 2023 was 31.29%, down 5.87pct year on year. The sharp decline in gross margin is expected to be mainly due to the decline in COVID-19 testing revenue; in 2023, the company's net profit margin was 4.34%, down 4.85pct year on year.
Same-caliber diagnostic services grew steadily, and the Precision Center continued to expand its diagnostic service business in 2023 to achieve revenue of 5.187 billion yuan, an increase of 11.91% year-on-year over 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.
By the end of 2023, the company had formed a national multi-center multi-level deep coverage ICL network layout of “1 headquarters laboratory, 4 regional central laboratories, 38 provincial and municipal flagship laboratories, 70 precision centers, and 700 cooperative laboratories”. 46 new co-built laboratories were added, and the total number of co-built laboratories increased by 26% over the same period last year. Twenty-seven new precision centers were added, bringing the total number of precision centers to 70. Of these, 31 achieved profits, and business revenue increased 34% year over year. In 2023, the company's self-produced product business achieved revenue of 403 million yuan, a year-on-year decrease of 73.74%; the channel product business achieved revenue of 8.283 billion yuan, an increase of 5.32% over the previous year.
Investment advice
The company's performance was pressured by the decline in the emergency diagnosis service business, but its endogenous growth was steady and accounts receivable risk was gradually released. It is estimated that in 2024-2026, the company's revenue will be 145.54/158.05/17.066 billion yuan, and net profit to mother will be 6.10/7.98/991 million yuan, respectively, and the corresponding EPS will be 0.97/1.27/1.58 yuan, respectively, covering our “increase in holdings” rating for the first time.
Risk warning
(1) Product quality control risk; (2) risk of bad debts in accounts receivable; (3) risk of falling product prices tested by the company.