occurrences

The company released its 2024 mid-year report. In the first half of 2024, it achieved operating income of 0.717 billion yuan (yoy +67.63%), net profit due to mother 0.157 billion yuan (yoy +70.93%), and net profit of 0.121 billion yuan (yoy +288.48%) after deducting non-return to mother net profit of 0.121 billion yuan (yoy +288.48%). Among them, in the second quarter of 2024, the company achieved operating income of 0.326 billion yuan (yoy +40.21%), net profit due to mother 0.076 billion yuan (yoy +139.02%), and net profit after deducting non-return to mother of 0.047 billion yuan (yoy +71.62%), which is in line with the company's previously announced performance forecast.

Incident reviews

Demand for respiratory products increased. In the first half of the year, the incidence of respiratory diseases was quite high compared to the full year of last year. There are many types of pathogens, the concept of accurate detection and accurate medication use is becoming more and more popular, and clinical demand for respiratory pathogens is getting higher and higher. In the field of respiratory diseases, the company comprehensively innovated from products, services to sales models, explored ecological construction implementation paths, and achieved major breakthroughs. Demand for accurate outpatient and emergency diagnosis and treatment, and “Internet+Medical” home self-examination continues to be driven, and the operating income of respiratory products in the first half of 2024 was basically the same as the total for the full year of last year.

The company has been deeply involved in the respiratory field for many years. In terms of products, the company has various combination solutions such as six joint upper and lower respiratory tract tests, single tests, immunological antigens, drug resistance gene screening, and second-generation sequencing of pathogens. In the field of technology, the company independently developed a series of core technologies such as high-precision “magnetic bead method”, “one-step method”, and general-purpose “fully automatic unified sample processing” and “POCT mobile molecular diagnosis”, which received the second prize of the National Science and Technology Progress Award, leading a series of core technologies such as disease solutions to intelligent health management, from the top three hospitals to primary medical institutions, and from end B to C Achieve coverage Changes for all people, all medical institutions, and all channels.

Serving the theme of national health, the company has built a comprehensive product line covering different people throughout the life cycle. It has independently developed more than 1,000 kinds of products that surpass advanced levels at home and abroad, such as infectious disease prevention and control, maternal and child health, blood safety, cancer prevention and control, and accompanying diagnosis, and can provide more than 2,200 testing services, forming an overall solution for the entire industry chain system integrating reagents, instruments, third-party medical testing services, and molecular laboratory co-construction.

In the field of maternal and child health, the company's product matrix was further improved, and the Coxsackie virus A6/A10 nucleic acid detection kit (PCR-fluorescence probe method) and the human MTHFR gene polymorphism nucleic acid detection kit (PCR-fluorescent probe method) were approved for marketing. Shengxiang's “HPV Rapid Test Method” is an innovative solution developed based on the HPV nucleic acid detection product developed on the rapid nucleic acid release technology platform and iPonic, a POCT instant detection system. The full testing process can be completed in 40 minutes. The scheme can be used as an innovative, efficient, and accurate new model for cervical cancer screening/clinical management.

In the field of bloodborne infectious diseases, the company's hepatitis B virus ribonucleic acid (HBV RNA) test kit (PCR-fluorescence probe method) was approved for marketing, and the hepatitis full-scenario solution was further improved. Serum HBV RNA is an HBV virological indicator developed in recent years, and the industry believes that HBVRNA strongly makes up for the lack of existing clinical diagnosis and treatment indicators for hepatitis B.

In the field of genetic sequencing, various detection technologies such as pathogen hypermultiplexed targeted sequencing (TNGs), pathogen metagenomic sequencing (MNGs), and pathogen full genome (WGS) have been used in various clinical key and difficult fields such as tuberculosis diagnosis and drug resistance prevention and control, respiratory infections, bloodstream infections, and central system infections.

The cost ratio declined during the period, gross sales margin improved, and profitability increased. In the first half of 2024, the company's gross sales margin reached 77.27% (yoy+10.53pp). The increase in gross margin was mainly related to the increase in the company's share of high-margin reagent revenue. In terms of period expenses, the company's sales expenses rate, management expense ratio, and R&D expense ratio were 31.18% (yoy-4.15pp), 16.57% (yoy-1.15pp), and 16.41% (yoy-4.75pp), respectively, and all cost rates declined to varying degrees, 2024 In the first half of the year, the company's net interest rate after deduction reached 16.88% (yoy+9.73pp). It is expected that with the further increase in the size of the company, the average cost will gradually decline, there is still room for the cost ratio to continue to decline during the period, and profitability will further increase in the future.

Investment advice

We expect the company's revenue in 2024-2026 to reach 1.543 billion yuan, 2.052 billion yuan, and 2,666 billion yuan, respectively, with year-on-year increases of about 53.2%, 33.0% and 29.9%, respectively. Net profit to mother in 2024-2026 will reach 0.333 billion yuan, 0.5 billion yuan, and 693 million yuan, respectively, with year-on-year increases of about -8.5%, 50.2% and 38.8%, respectively. EPS for 2024-2026 was 0.57 yuan, 0.86 yuan, and 1.19 yuan, respectively, and the corresponding PE valuations were 34x, 23x, and 16x, respectively. Overall, the company has built a platform-based IVD enterprise through a diversified layout. It has significant competitive advantages in various fields of respiratory infections and reproductive tract infections, and maintains a “buy” rating.

Risk warning

New product development progress falls short of anticipated risks.

The promotion of respiratory infection detection reagents falls short of anticipated risks.

Competition in the industry heightens the risk.