Incidents:
Shengxiang Biotech released its 2024 semi-annual report on August 18: In the first half of 2024, the company achieved revenue of 0.717 billion yuan (+68%, year-on-year scale, same below), net profit to mother of 0.157 billion yuan (+71%), and net profit of 0.121 billion yuan (+288%) after deducting non-return to mother.
Investment highlights:
Respiratory products are growing rapidly. Public health events have stimulated a sharp increase in demand for respiratory disease testing. The company has comprehensively innovated from a series of respiratory pathogen diagnosis products, services to sales models, and continued to grow, from accurate outpatient and emergency diagnosis and treatment, and “Internet+Healthcare” to home self-testing. The operating revenue of respiratory products in 2023 exceeded 0.4 billion yuan (+680%), 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.
Based on innovative research and development, breakthroughs have been made in key technologies in various fields, and the product matrix continues to be rich. During the reporting period, the company invested 0.145 billion yuan (+42%) in R&D, accounting for 20% of revenue; the number of R&D personnel was 537 (+12%), accounting for 24% of the total number of people in the company; 21 invention patents were obtained during the reporting period, with a cumulative total of 129 invention patents. In the field of maternal and child health, the Coxsackie virus A6/A10 nucleic acid detection kit and the human MTHFR gene polymorphism nucleic acid detection kit were approved, and Shengxiang's “HPV Rapid Test Method” was launched. In the field of hematology, hepatitis B virus ribonucleic acid detection kits have been approved for marketing, and solutions for all scenarios of hepatitis have been further improved. In the field of chronic diseases, the human ApoE gene polymorphism nucleic acid detection kit has been approved to assist in clinical monitoring of the efficacy of statins and assess the risk of cardiovascular and cerebrovascular diseases such as Alzheimer's disease, atherosclerosis, coronary heart disease, and stroke. In the field of genetic sequencing, the domestic high-throughput gene sequencer SansureSeq 1000 submitted a registration application. In the field of immunodiagnosis, the subsidiary Ansai's diagnostic product matrix has been further enriched, and progesterone (Prog) and human chorionic gonadotropin (HCG) test reagent products have been approved.
The company launched the “Infectious Disease Digital Intelligence System”, which integrates rapid detection, real-time monitoring, and accurate prediction of various technological innovation paths. Terminal detection data is uploaded to the cloud in real time through the cloud system for information-based integration, and relies on AI model technology analysis to predict infectious disease development trends.
We believe the system has the potential to have a profound positive impact on public health prevention and control.
An interim dividend was announced and shares cancelled to return investors. The company plans to distribute a cash dividend of 2.50 yuan for every 10 shares, for a total cash dividend of 0.143 billion yuan. Since listing in 2020, the company has implemented 9 cash dividends, with a cumulative dividend of 2.055 billion yuan. At the same time, in order to increase the company's long-term investment value and increase the level of earnings per share, the company plans to cancel 1 million shares. After the cancellation is completed, the total share capital of the company will be changed to 582,388,006 shares.
Profit forecast and investment rating: The company's revenue for 2024-2026 is expected to be 1.512 billion yuan, 2.023 billion yuan, 2.54 billion yuan, and 2.54 billion yuan, respectively; net profit to mother is 0.33 billion yuan, 0.46 billion yuan, and 0.615 billion yuan, respectively, up -9%, +39%, and +34% year over year; PE is 33 times, 24 times, and 18 times, respectively. The company's respiratory molecular diagnostic products are growing rapidly, and breakthroughs have been made in various fields such as maternal and child care, blood screening, chronic diseases, genetic sequencing, and chemiluminescence. First coverage, giving a “buy” rating.
Risk warning: the risk that the demand for respiratory pathogen testing falls short of expectations, the risk that the penetration rate of nucleic acid methodologies falls short of expectations, the risk of increased industry competition, the risk that R&D progress falls short of expectations, and the risk that new product promotion falls short of expectations.