Incidents:

On October 24, 2024, Jet Biotech released its 2024 three-quarter report: in the first three quarters of 2024, the company achieved operating income of 0.391 billion yuan, up 18.56% year on year; realized net profit of 0.05 billion yuan, up 259.26% year on year; realized net profit without deducted back to mother 0.044 billion yuan, up 330.98% year on year; gross sales margin of 39.78%, up 12.42 pcts year on year, net sales margin of 12.88%, year on year increase 8.59 pcts; as of the end of September 2024, the company's inventory amount was 0.11 billion yuan, up 26.44% year on year; the company's net cash flow from operating activities in the first three quarters of 2024 was 0.009 billion yuan, down 87.60% year on year.

In the 2024Q3 single quarter, the company achieved operating income of 0.155 billion yuan, +16.22%, and +12.03% month-on-month; realized net profit of 0.02 billion yuan, +83.25% year-on-year, -7.63% month-on-month; net profit after deducting non-return to mother 0.019 billion yuan, +97.29% year-on-month, -11.78% month-on-month; gross sales margin was 43.05%, +11.31 pcts year over month; net sales margin was 13.10% , +4.75 pcts year on year, -2.75 pcts month on month; at the end of the 2024Q3 quarter, the company's inventory amount was 0.11 billion yuan, +26.44% year over year, +30.95% month on month; in the 2024Q3 single quarter, net cash flow from the company's operating activities was -0.006 billion yuan, changing from positive to negative year over year.

Investment highlights:

Downstream demand continued to pick up. The company's 2024Q3 profit growth year-on-year was affected by changes in the supply and demand relationship within the industry, and downstream market demand rebounded somewhat. In the first three quarters of 2024, the company achieved revenue of 0.391 billion yuan, an increase of 18.56% over the previous year. In the first three quarters of 2024, the company's net profit to mother was 0.05 billion yuan, an increase of 259.26% over the previous year. The company's sales expense ratio for the first three quarters of 2024 was 5.34%, 1.54 pcts; the management expense ratio was 7.29%, +1.02 pcts year over year; R&D expenses rate was 5.08%, -2.13 pcts year over year; and the financial expense ratio was 4.29%, +3.48 pcts year over year. As of the end of September 2024, the company's inventory value was 0.11 billion yuan, up 26.44% year over year. The net cash flow from the company's operating activities in the first three quarters of 2024 was 0.009 billion yuan, a year-on-year decrease of 87.60%, mainly due to the increase in the company's strategic reserves, prepaid raw material payments, and increased tax payments.

Actively promote product research and development, and continue to improve core technology

The company is mainly engaged in R&D, production and sales of life science consumables for cell culture and liquid treatment. Facing an environment where downward pressure on the world economy continues, demand in the domestic life science consumables market has rebounded, and price games continue, in the first half of 2024, the company continued to increase investment in research and development of disposable plastic consumables in biological laboratories in line with the development trends of the life science and IVD industries, actively layout the R&D and industrialization of new products around market needs in the fields of cell therapy, biomedicine, vaccine research and development, and continue to improve automated manufacturing capabilities.

In terms of cell culture medium, the company launched a series of biological reagent products such as fetal bovine serum, serum-free medium, basic medium, and auxiliary reagents.

Strengthen independent brand building and expand the layout of medical consumables and equipment. By the end of 2023, the domestic life science consumables market was still dominated by imported brand products. The domestic market was dominated by imported brand products, and domestic life science service companies were dominated by small and medium-sized enterprises. With the improvement of the quality of domestic brand products, the localization rate in the field of laboratory consumables is increasing year by year. The company is a leading domestic life science consumables company. Compared with similar products from international brands, there is not much difference in the company's product performance indicators. In the first half of 2024, the company will continue to step up its domestic and foreign market development efforts, set up a subsidiary in Germany, and will use this as a base to promote its own brand to the European market. At the same time, the company is actively promoting penetration into the medical consumables and medical equipment industry based on its core strengths in cell culture and life science consumables.

Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 0.554, 0.674, and 0.811 billion yuan, respectively, and net profit to mother will be 0.073, 0.09, and 0.111 billion yuan, respectively, corresponding to 26.53, 21.45, and 17.49 times PE, respectively. As a leading domestic life science consumables company, the company has a first-mover advantage among domestic brands. As the localization rate increases year by year, the company is expected to increase its market share year by year, grow rapidly, and achieve import substitution. Maintain a “buy” rating.

Risks suggest that market development falls short of expectations; risk of raw material price fluctuations; new product development falls short of expectations; industry competition pattern deteriorates; risk of falling product prices; domestic substitution process falls short of expectations; risk of exchange rate fluctuations.