Incident: The company released its 2023 report and 2024 quarterly report. In 2023, it achieved revenue of 1.29 billion yuan, -64% year-on-year, realized net profit of 70.96 million yuan, -111.9% year-on-year, and net profit after deducting non-return to mother of 190 million yuan, or -132.3% year-on-year. The first quarter of 2024 achieved revenue of 300 million yuan, -0.2% year-on-year, net profit of 5.22 million yuan, +110.3% year-on-year, after deducting non-attributable net profit of 15.95 million yuan, +78.8% year-on-year.

Regular business revenue continues to grow, and fluctuations in revenue from related test reagents affect overall performance. The decline in revenue in 2023 is mainly due to a sharp drop in sales revenue of test reagents related to public health prevention and control. Regular business is expected to grow rapidly. On a quarterly basis, 2023Q1/Q2/Q3/Q4 achieved revenue of 3/2.7/3.42 billion yuan respectively. The demand for procurement of related products from downstream customers in Q1 in 2023 was high, and Q2-Q4 revenue showed a month-on-month growth trend. Net profit attributable to mother was -5062/3047/470/5.43 million yuan, respectively. The gross profit margin of sales in 2023 was 71%, +2.2pp compared to the year. It is expected to be mainly due to changes in revenue structure. In terms of expense rates, 2023 sales expense rate/management expense ratio. /R&D expenditure rates were 36.8%/18.4%/26.3%, respectively. The company's operating cost level showed a quarterly improvement trend, but the overall cost decline was still lagging behind. As future revenue grows, the company's profitability is expected to gradually improve. In 2023, the company accrued asset impairment losses of 140 million yuan, of which Q4 accrued impairment losses of 60 million yuan, mainly due to inventory price drop losses for related test reagent products and impairment losses on contract performance costs. 24Q1 revenue declined slightly year-on-year, which is expected to be due to base effect and downstream inventory cycle impact.

AD detection reagents have been approved for marketing, and product research and innovation in various fields continues to be promoted. In April 2023, the company announced that a series of Alzheimer's disease detection reagent products were approved for marketing. The testing items covered six test items, including Abeta protein, phosphorylated Tau protein, NfL, and GFAP. In May 2023, the company signed an agreement with Shanghai Pharmaceutical Kangdelle to jointly promote the promotion of academic education and screening programs for the company's AD blood test products, and sign related distribution cooperation agreements. Innovative drugs in the AD field were approved for marketing for the first time in 2023, and the clinical application of related products will drive the company's sales of test reagents. In addition to AD blood test reagents, the company has a wide range of key product lines.

In 2023, the company completed the development of a respiratory product line project and collaborated with Mindray Healthcare on automation solutions for related products. The company continues to promote the development of microfluidic testing products. The subsidiary Droplet Logic initially completed the implementation of the five core technologies of the microfluidic control platform in 2023, including digital microfluidic control, full extraction+multiple amplification chamber qPCR, innovative optical systems, freeze-drying processes, and industrial production. The company lays out a wide range of innovative products in multiple fields, and is expected to grow into a comprehensive life science platform enterprise in the future.

Profit forecast: The company's 2024-2026 EPS is expected to be 0.19 yuan, 0.74 yuan, and 1.30 yuan respectively, with corresponding valuations of 152 times, 38 times, and 22 times, respectively.

Risk warning: risk of downstream customer demand falling short of expectations; risk of increased industry competition; risk of the company's new product development falling short of expectations