2Q24 The company's revenue growth rate recovered further, with net profit attributable to mother and net profit reversed loss to profit Company 1H24 operating income/net profit deducted from mother of 0.649/0.016/-0.015 billion yuan, revenue +13.70% year-on-year, in line with the performance forecast, net profit to mother turned loss into profit, and net profit after deducting non-net profit decreased significantly year-on-year; 2Q24 operating revenue/net profit attributable to mother/net profit of 0.348/0.011/0.001 billion yuan, revenue +29.33% year-on-year Net profit turned negative, revenue growth recovered further in 2Q24, and profit performance improved markedly. We expect EPS of 0.26/0.74/0.91 yuan in 24-26 years. Considering the company's comprehensive business layout, new business products such as AD have gradually been expanded, and fee control measures have gradually paid off. We gave PE a 25-year 30x valuation (comparable to the company's 25-year average expected average estimate of 23x), corresponding to a target price of 22.29 yuan, maintaining a “buy” rating.

The three cost ratios of 2Q24 decreased significantly year-on-year, and gross margin decreased year-on-year, the company's 1H24 sales/management/R&D/finance expense ratio was 33.52%/21.95%/0.14%, -6.24/-3.61/-8.16/+1.79pct, 2Q24 sales/management/ R&D/ finance expenses ratio 32.97%/15.72%/20.63%/0.18%, year-on-year, -13.12/-2.79/-11.73/+3.98pct. The company continues to strengthen cost control. 1H24 results are gradually reflected, and sales, management and R&D expenses rates have dropped sharply over the same period last year. The company's 1H24/2Q24 gross profit margin was 70.74%/70.47%, -1.54/-5.89pct year-on-year. We believe gross margin declined or was due to changes in revenue structure.

The life science business continues to recover, and AD product volume is expected to drive rapid growth in vitro diagnosis revenue. We believe that the 1H24 growth rate of the company's routine business will continue to recover: 1) Life science: we estimate that 1H24 research reagent market demand will continue to recover, and routine revenue will resume rapid growth; 2) In vitro diagnosis: we estimate that 1H24 in vitro diagnosis business revenue will grow rapidly year over year as AD testing products begin to be released; 3) Biomedicine: Considering the high base of COVID-related vaccine revenue in the same period last year, we estimate that the 1H24 vaccine CRO related business volume shrank. 1H24 revenue declined year-on-year; 4) Microfluidic control: All raw materials have been localized, mass-produced through automated assembly lines, and production capacity can reach 1 million people/line/year.

International business is expanding at an accelerated pace, and revenue scale is growing rapidly

The company continues to deepen localized operations in overseas markets, and continues to strengthen cooperation and exchanges with local scientific research institutions and academia, laying a solid foundation for further expanding the international market. 1H24's overseas revenue was 0.041 billion yuan (+144% year over year), and revenue in North America, Europe, Southeast Asia and other regions showed a year-on-year increase.

1H24 domestic revenue was 0.608 billion yuan, +9.8% year-on-year, and domestic revenue grew steadily.

The rapidly growing Chinese life science service leader maintains a “buy” rating. We expect the company's net profit to be 0.104/0.297/0.365 billion yuan in 24-26, a year-on-year profit/ +185%/+23%. The current stock price corresponds to the 24-26 PE valuation of 74x/26x/21x, and the target price is 22.29 yuan (previous value 35.72 yuan), maintaining the “buy” rating.

Risk warning: New business growth falls short of expectations; overseas development is low.