Incident: The company released its 2024 semi-annual report. From January to June 2024, it achieved operating income of 1.279 billion yuan (-7.37%), net profit to mother 0.202 billion yuan (+15.38%), net profit of 0.199 billion yuan (+11.49%), and operating cash flow of 0.213 billion yuan (-48.09%). 2024Q2 achieved operating income of 0.663 billion yuan (-5.93%), net profit to mother of 0.081 billion yuan (+40.32%), deducted non-net profit of 0.081 billion yuan (+39.45%), and operating cash flow of 0.208 billion yuan (-14.37%). The growth of independent products drove performance improvement, and the agent product business was further divested: 1. From January to June 2024, the company's independent product business achieved sales revenue of 0.932 billion yuan (+7.61%). The revenue share has increased from 37.73% in 2019 to 72.91% (+35.18pct), and the net profit contribution has increased from 75.27% in 2019 to 87.24% (+11.97pct); 2024H1 autonomous reagent product sales increased 23.4% year-on-year, achieving revenue of 0.859 Billions of yuan (+5.9%), gross profit margin of 72.42% (+1.54pct). The main reason why the revenue growth rate is lower than the sales growth rate is due to the gradual implementation of the collection policy and price changes brought about by the adjustment of the company's distribution system. ② Agency products: In the past two years, the company has accelerated the divestment of agent products. From January to June 2024, the company's agent product business achieved revenue of 0.334 billion yuan (-32.69%) and a gross profit margin of 13.68% (-7.75pct). Active adjustments in agency business led to a decline in the company's apparent revenue, but overall profitability increased significantly. The comprehensive gross margin of 2024H1 was 57.00%, an increase of 3.62 percentage points over the previous year.
Actively promote assembly line construction, and the strategy focuses on cultivating long-term momentum: The company vigorously promotes intelligent inspection and analysis lines throughout the laboratory and collaborates with the installation of stand-alone terminals on various platforms. Market holdings and effective use of diagnostic instruments are important factors driving the rapid growth of independent reagent products, so the promotion of assembly line solutions is expected to provide long-term impetus for the company's future performance growth. From January to June 2024, the company shipped 2,301 units (pieces) of large-scale instruments and assembly lines for its own products, including 109 free assembly lines and 110 blood lines.
Continue to invest in scientific and technological innovation and deepen the strategic layout of all products: the company insists on investing 25-30% of annual net profit in independent research and development, and has invested more than 1.5 billion yuan in R&D in the past 5 years (accounting for 15.63% of independent product revenue).
2024H1 invested 0.186 billion yuan (+13.81%) in R&D, accounting for 19.98% of independent product revenue.
At present, the company's own products cover nine major platforms: biochemical, immune, blood cell, blood type, coagulation, urine, molecular, rapid testing, and pathology, and the products are continuously updated iteratively. In the first half of 2024, the company's high-speed fully automatic chemiluminescence immunoanalyzer i6000 and biochemical high-speed fully automatic analyzer C2000 were certified. While they have excellent product performance, they can also be flexibly and freely combined with other module testing equipment to form a completely autonomous intelligent assembly line. As of 2024Q2, the company has obtained 516 product registration certificates (209 immunizations+146 biochemical items).
Investment advice: The company is a leading IVD enterprise with leading technical strength and comprehensive product layout. The rapid implementation of high-speed machines and assembly line solutions provides the company with long-term growth impetus. We expect the company's net profit to be 0.451/0.564/0.697 billion yuan in 2024-2026, up 44.24%, 24.99%, and 23.67% year-on-year, with EPS of 0.74 yuan, 0.92 yuan, and 1.14 yuan respectively. The current stock price corresponds to PE16/13/10 times 2024 to 2026, maintaining the “recommended” rating.
Risk warning: Product price decline. Risk of exceeding expectations, risk of assembly line installation progress falling short of expectations, risk of reagent loading falling short of expectations.