Key points of investment

Incident: On May 23, 2024, Haier Biotech announced that it plans to acquire a holding of Shanghai Yuanshi Instrument Co., Ltd. (hereinafter referred to as “Shanghai Yuanshi”) through an agreed transfer and hold 70% of Shanghai Yuanshi's shares.

Shanghai Yuanshi is a market leader in spectrometers and organic element analyzers: Established in 2008, Shanghai Yuanshi is a national high-tech enterprise specializing in R&D, production, sales and service of scientific analytical instruments. The official website shows that the company has a rich product line for spectral, organic element analysis, and pretreatment. As a “specialized and innovative” enterprise, the company has obtained more than 70 national patents and software certificates with continuous R&D and innovation capabilities. At the same time, its product technology application direction has good market influence. Spectroscopy and organic element analysis equipment rank first among domestic instruments and are sold to more than 90 countries and regions around the world. According to SDI statistics, the global analytical instrument market is expected to be 75 billion US dollars in 2022. The Chinese market accounts for about 12-15%, and the growth rate is higher than the global average. Among them, organic element analysis instruments are important equipment in chemical, electronics, food and other industries, and spectral analysis instruments are indispensable high-end equipment in the fields of scientific research, environmental monitoring, agricultural and food safety products, and medical care. Demand in the domestic market has risen rapidly in recent years. According to data from the Huajing Industrial Research Institute, the overall scale of the industry will exceed 8 billion yuan in 2022, and the domestic spectrometer market is expected to reach 10.165 billion yuan in 2025.

Impact on Haier Biotech: ① Enhancement Report: Referring to the net interest rate level of overseas analytical instrument companies, we expect Shanghai Yuanshi's net interest rate to be 15-20%, effectively enhancing Haier Biotech's report; ② Layout analysis instruments: Haier Biotech's non-storage sector is developing rapidly (+30% compared to 2023, 2024Q1 +22%). This merger and acquisition helped Haier Biotech open up the analytical instrument sector and continue to improve overall solutions; ③ Channel and market complementarity: Shanghai Yuanshi's current application scenarios are mainly environmental, food testing, etc., and lacks pharmaceutical and overseas market channels, sea. On the one hand, after integration, Shanghai Yuanshi's product customer base can be expanded to the pharmaceutical and overseas markets, and on the other hand, Haier Biotech can also expand the customer base of Haier Biotech to achieve a win-win situation; ④ Haier Biotech will continue to support Shanghai Yuanshi to increase R&D investment after the company's acquisition, from the current UV spectrophotometers to visible light and near-infrared spectrophotometers, and other total organic carbon analyzers, water quality analyzers, fluorescence spectrometers, soil organic analyzers, etc. are also expected to accelerate the development of the company. We believe that the three major companies in Chongqing and Houhong Intelligence acquired by Haier Biotech in the past have all verified the company's integrated development capabilities, and the value of the platform is expected to gradually be realized.

Profit forecast and investment rating: We maintain the company's 2024-2026 revenue expectations of 28.63/34.36/4.054 billion yuan, respectively, and net profit to mother of 573/7.04/851 million yuan respectively. The current stock price corresponds to PE at 22/18/15 ×, respectively, maintaining a “buy” rating.

Risk warning: demand recovery falls short of expectations, development of new products falls short of expectations, exchange gains and losses, risk of impairment of goodwill, etc.