Domestic rapid respiratory joint inspection leader, based in China, working globally

Innotek is one of the manufacturers with the most comprehensive layout in the field of respiratory joint testing in China. It has a variety of domestic exclusive (influenza IgM triple test, respiratory antigen triple test, respiratory IgM 5 joint test, etc.) and domestic exclusive (respiratory IgM 9 joint test, etc.) products, strategically in the deep respiratory field and other production lines such as broad digestive tract. We expect EPS to reach 2.94/3.91/5.19 yuan (CAGR over 30%) in 24-26, based on: 1) the respiratory testing industry is expected to continue to grow at a high rate, driven by joint efforts on the supply side and demand side; 2) the domestic multi-channel momentum is good, overseas cultivation is the second growth curve; 3) the digestive tract and other production lines contribute more. The company's product layout is complete and the first-mover advantage is obvious. It has accumulated and underdeveloped. It was given 16x PE in 24 years (comparable to the company Wind's consistent expected average value of 14x), corresponding to a target price of 47.08 yuan, and a purchase rating for the first time coverage.

Respiratory testing industry: The supply side and demand side are working together, and a continued boom can be expected. There are dozens of common respiratory pathogens. Some are prevalent throughout the year, and some are clearly seasonal. The causes of respiratory diseases are complex but the symptoms are similar. Fast and accurate identification is the key to treating the cause, so the need for multiple joint tests is clear. The rapid immunochromatography platform is irreplaceable due to its advantages of short testing time (generally within 15 minutes vs. several days for pathogen cultivation, usually a few hours for nucleic acid), low cost, and easy operation. It is particularly suitable for outpatient emergency, primary care and out-of-hospital markets. The ILI% data for sentinel hospitals in the northern and southern provinces of the country has remained high for 24 years, higher than the same period in most historical years, and is similar to the ILI% trend after the US epidemic. We believe that the continued high prevalence of respiratory pathogens and the spread of detection technology are expected to increase the penetration rate of the industry, and that supply-side and demand-side efforts will boost the continued boom in the testing industry.

Respiratory business: Domestic multiple channels go hand in hand, and the overseas expansion momentum is steep. Zhengsheng's respiratory business earned 0.464 billion yuan in 23 years, of which 0.405 billion yuan was not COVID-19. It still grew 246% year-on-year against the backdrop of a shortage of production capacity in 23, and demand was strong. Looking ahead to 24-26, considering that production capacity bottlenecks have been successfully broken through, we expect respiratory revenue CAGR to exceed 30%, based on: 1) Domestic:

By the end of '23, it had covered more than 4,000 hospitals (VS 7M22 only about 1,700). For high-grade hospitals, increasing coverage and yield is a follow-up focus; for primary hospitals, following the trend of hierarchical diagnosis and treatment, increasing grassroots development is the key; at the same time, the company has officially entered the C-side market and cooperated with many major manufacturers since '24, and the trend is good; 2) Overseas: It has set up an international market headquarters in Singapore and used Southeast Asia as an entry point for the international market. The first tests of star products such as the four-joint inspection are promising.

Digestive tract and others: Gastrointestinal joint testing has great potential. New products such as allergies and gynecology have followed one after another. Among them, group A rotavirus, adenovirus, and norovirus triple tests, calprotectin and lactoferrin double tests, Helicobacter pylori antigen tests, etc. have been approved one after another in 22-24 years, and it is expected that the current children's hospital channel can be rapidly released (in collaboration with respiratory patients and channels). The company's self-production ratio of key ingredients such as antigens and antibodies is leading the industry, helping the company achieve efficient R&D and iteration, and enter new fields such as allergies and gynecology one after another.

Risk warning: Sales of core products fall short of expectations, increased market competition, and loss of core technical personnel.