Key points of investment:

Maintain an increase in holdings rating. Maintain the 2024-2026 EPS forecast of 0.73/0.95/1.24 yuan, maintain the target price of 24.61 yuan, corresponding to the 2024 PE 34X, and maintain the holdings increase rating.

Q2 Steady and rapid growth under a high base, and performance is in line with expectations. The company achieved operating income of 0.543 billion yuan (+18.38%), net profit of 0.144 billion yuan (+13.49%), net profit of 0.132 billion yuan (+20.72%) after deducting the amortization impact of equity incentive expenses (16.85 million yuan), net profit to mother 0.161 billion yuan (+26.78%), net profit of 0.149 billion yuan (+26.78%) after deducting the net profit of non-return to mother of 0.149 billion yuan (+36.13%) ), the performance was in line with expectations. Among them, Q2 achieved operating income of 0.31 billion yuan (+17.53%), net profit to mother of 0.08 billion yuan (+14.71%), deducting non-net profit of 0.075 billion yuan (+16.71%), and steady and rapid revenue growth under a high base.

Domestic business is growing steadily, and overseas markets are growing rapidly. In 2024, revenue from H1 test reagents was 0.448 billion yuan (+16.75%), gross profit margin 90.89% (+0.35pct); revenue from testing services 0.32

100 million yuan (-28.01%), gross profit margin 51.46% (+8.51pct). Domestic market revenue is 0.413 billion yuan (+16.02%). The company continues to promote the admission of compliant products to hospitals, further increasing its share of the hospital market. Relying on medical testing laboratories, LDT products are developed using Class III IVD product registration standards, responding to the needs of pilot hospitals to establish LDT product R&D, preparation, use, and quality control systems, and promoting the transformation of LDT products into IVD products after maturity. The international market and commercial revenue of pharmaceutical companies is 0.13 billion yuan (+26.51%). The international market has wholly-owned subsidiaries in Singapore and Canada, and European logistics centers in the Netherlands. Localization and market entry are progressing smoothly, becoming an important growth point for the company's performance.

Cooperation among pharmaceutical companies is growing rapidly, and research and development of new products is progressing smoothly. The company's products participate in clinical trials of drugs originally developed by many well-known domestic and foreign pharmaceutical companies by means of accompanying diagnosis, injecting new impetus into the company's long-term development. In 2024, H1 drug clinical research service revenue was 0.06 billion yuan (+136.07%). Maintaining a high level of R&D, the R&D investment was 0.106 billion yuan (+15.62%), accounting for 19.56% of revenue. With a rich inventory of new products, the combined detection kit for human IDH1/IDH2 mutant genes (fluorescence PCR method), 11 mutant gene detection kits for human lung cancer (multiple fluorescence PCR method), human homologous recombination repair defect detection kit (high-throughput sequencing), HER2, estrogen receptor, and progesterone receptor antibody reagents (immunohistochemistry) are expected to become a new growth point after marketing.

Risk warning: New product launches and promotions fall short of expectations; risk of price reduction in product collection