The apparent performance was affected by the revenue base for molecular diagnostic reagents, and net profit to the mother fell 55% year-on-year in 2023. In 2023, it achieved revenue of 2,896 million yuan (-19.8%), net profit attributable to mother of 313 million yuan (-55.9%), and net profit of non-return to mother of 316 million yuan (-55.5%). Among them, quarterly revenue for the fourth quarter was 781 million yuan (-19.7%), and net profit to mother was 44 million yuan (-59.1%). The sharp year-on-year decline in performance was mainly due to changes in market demand for molecular diagnostic products, and the company prepared asset impairment in accordance with the requirements of accounting policies. Secondly, the company continued to adjust agency business. Excluding the base effect of molecular diagnosis, the company's independent conventional products increased 8.27% year over year in 2023. In the first quarter of 2024, we achieved revenue of 616 million (-8.9%) and net profit of 120 million yuan (+3.05%). The regular business gradually returned to a normal growth trajectory, accelerated the shift from direct sales to distribution business, and vigorously promoted the installation of assembly lines and stand-alone machines.

After eliminating COVID-19, independent products achieved growth, and increased the installed capacity of intelligent laboratory inspection and analysis lines.

In 2023, revenue from independent products was 1.88 billion yuan (-18.67%), of which independent conventional products increased 8.27% year on year; revenue from conventional reagents for independent products was 1,715 billion yuan (+4.92%). Immunization reagents sold 952 million (+18.68%), biochemical reagents sold 577 million (+2.54%), and temporary testing reagents sold 176 million (+27.38%). The company vigorously promotes the three major laboratory platforms — biochemical, immunology, and clinical testing integrated products — to provide end customers with flexible laboratory intelligent inspection and analysis lines. In 2023, 4016 large-scale instruments and assembly line units () of its own products were shipped out of the market, including 189 live free assembly lines, 162 blood lines, 1,458 chemiluminescence instruments, and 1,369 blood instruments. The instruments introduced into the terminal market will continue to grow in test agent sales.

Gross margin has rebounded, and operating cash flow has remained steady and high quality. The gross margin in 2023 was 55.27% (+1.0pp). As the share of revenue from independent products increases and reagent sales volume, it is expected to continue to drive gross margin growth. Sales expense ratio 22.53% (+5.1pp), management expense ratio 6.36% (+2.0pp), financial expense ratio 0.81% (+0.3pp). In 2023, R&D investment was 414 million (+22.34%), accounting for 22.02% of revenue from independent products. Strong investment was maintained, with a net profit margin of 10.52% (-8.9pp), and profitability was under pressure. Net operating cash flow in 2023 was 902 million (+6.9%), and the ratio of net operating cash flow to net profit to mother reached 288%.

Investment advice: Considering the impact of the company's accelerated strategic transformation and industry policy environment, the 2024-25 profit forecast was lowered, and the 2026 profit forecast was added. Net profit due to mother is expected to be 413/5.30/637 million yuan in 2024-26 (originally 477/671 million yuan in 2024-25), with a year-on-year growth rate of 32.2%/28.3%/20.2%; the current stock price corresponds to PE = 20/15/13x. The company's business covers 9 major platforms, including biochemistry, immunology, and blood cells, and vigorously promotes intelligent testing and analysis lines throughout the laboratory, while also accelerating strategic adjustments in agency business and direct sales transformation and distribution, and maintaining a “buy” rating.

Risk warning: the risk of price reduction in the collection of in vitro diagnostic reagents, research and development falling short of expectations, and increased competition risks.