Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 3.38 billion yuan, a year-on-year increase of 4.24%, achieved net profit to mother of 0.956 billion yuan, an increase of 6.13% over the previous year, and achieved deduction of 0.93 billion yuan in non-net profit, an increase of 6.69% over the previous year.

On a quarterly basis, in the third quarter of 2024, the company achieved operating income of 1.173 billion yuan, a year-on-year increase of 3.38%, a month-on-month increase of 4.92%, net profit of 0.337 billion yuan, a year-on-year decrease of 5.18%, an increase of 14.01%, after deducting non-net profit of 0.332 billion yuan, a year-on-year decrease of 3.99% and a year-on-month increase of 16.37%. Thanks to the continued expansion of the company's regular business, the company's single-quarter results showed a good recovery trend.

Expense side: In the first three quarters of 2024, the company's gross profit margin was 65.86%, up 1.27 pp; in the first three quarters of 2024, the company's sales expense ratio was 16.32%, down 0.38pp, the management expense ratio was 4.38%, the financial expense ratio was 0.23%, the year-on-year increase 0.13pp, the R&D expense ratio was 15.13%, and the year-on-year increase was 0.89pp. The company's overall expense ratio remained stable in the first three quarters of 2024; the company achieved a net profit margin of 28.68% in the first three quarters of 2024, a year-on-year increase 0.45pp

Regular business remains resilient under external disturbances, and it is expected to reach an inflection point after the policy is cleared. Since 2024, policies such as DRGs and diagnostic reagent collection have been promoted one after another in various provinces, and the impact of medical rectification has not been eliminated. The diagnostic industry as a whole is facing both volume and price pressure. The company's self-developed high-end equipment such as 600-speed high-speed machines and X1 local assembly lines can effectively meet the needs of large sample customers, and installed customers continue to rise, laying the foundation for luminescence growth. We expect the company's chemiluminescence business to maintain a relatively good growth trend. The biochemical sector may be under pressure in the short term due to the impact of collection and price adjustments, etc., and characteristic businesses such as mass spectrometry and molecules have performed well. We expect that with the full implementation of relevant adjustment policies, the company's various businesses are expected to gradually accelerate after the short-term pressure is fully released.

Continuously increase investment in R&D, and new products and new projects provide impetus for the company's long-term development. In terms of chemiluminescence, the company successfully launched a series of 33 autoantibody testing products, covering six major disease series, including antinuclear antibody spectrum and rheumatoid arthritis antibody spectrum. In terms of biochemical testing, following the AutoChem B801 series of fully automatic biochemical analyzers, the company obtained a high-throughput autoChem B2000 series medical device registration certificate, further enriching the biochemical testing product line. In terms of the NGS product business, the company's wholly-owned subsidiary Sikun Biogene Sequencer has completed clinical trials, the sequencing system has begun trial sales in the non-clinical field, and the next-generation fully automated microbial mass spectrometry system developed by the company has entered the production trial stage; the nucleic acid mass spectrometry Autof Gene has obtained a medical device registration certificate and production license, and the development of the triple quadrupole LC-MS system is progressing according to plan. As the company's ongoing research projects are launched one after another, we are optimistic about the company's medium- to long-term development prospects.

Profit forecast and investment suggestions: According to financial data, we have adjusted profit forecasts. It is expected that the company's regular business will continue to recover. Changes in regulatory policies may affect short-term performance. The company's revenue in 2024-2026 is 4.63, 5.359, 6.415 billion yuan, (4.903, 5.937, 7.282 billion yuan before 2024-2026), up 4%, 16%, 20% year-on-year, and net profit of 1.33, 1.545, and 1.872 billion yuan Yuan (1.394, 1.689, 2.097 billion yuan before 2024-2026) increased 9%, 16%, and 21% year-on-year. The company's current stock price corresponds to about 20, 17, and 14 times PE from 2024-2026. Considering that the company's luminescence competitiveness continues to increase, molecular products have entered the release stage. At the same time, through self-development+cooperation, they continue to launch products with high growth potential and maintain a “buy” rating.

Risk warning: The risk of product promotion falling short of expectations, the risk of policy changes, and the risk that the public information used in the research report may be delayed or not updated in a timely manner.