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 0.986 billion yuan, a year-on-year increase of 13.42%, and achieved net profit due to mother 0.018 billion yuan, an increase of 123.77% over the previous year; realized net profit without deduction of -0.03 billion yuan, a year-on-year increase of 78.60%.

By quarter, the company achieved operating income of 0.337 billion yuan, a year-on-year increase of 12.87%, and achieved net profit of 0.002 billion yuan in the 2024 single third quarter, a year-on-year decrease of 57.55%; realized net profit withholding of -0.015 billion yuan, an increase of 30.88% year on year. Thanks to rapid breakthroughs in overseas markets and the impetus of various new domestic products, the company maintained a good growth rate of revenue in the single quarter.

Expense side: The company's sales expense ratio for the first three quarters of 2024 was 34.21%, down 3.70pp; management expense ratio was 16.47%, down 3.43pp; R&D expense ratio was 21.76%, down 6.85pp year on year, and all investments achieved optimal management. The financial expenses ratio was 0.69%, up 2.47pp year on year; the company's gross profit margin for the first three quarters of 2024 was 70.48%, down 0.45pp year on year, and net profit margin was 1.73%, up 10.67pp year on year.

The life sciences and biomedical sectors are growing significantly, and the IVD business is performing steadily. In the life sciences sector, the company continues to launch high-performance products such as cellular protein reagents, continuously breaking through market blockades for high-end products from overseas brands. At the same time, with localized operation channels in North America, Europe and other regions, we expect related reagent products to grow rapidly. The in vitro diagnosis sector is affected by overall industry policies combined with inventory digestion. We expect IVD business performance to be relatively stable. The company will continue to accelerate innovative R&D and marketing of specialty test varieties such as AD and encephalitis, and rapidly release related products in the future.

In the biomedical sector, along with the continued execution of orders for multiple product lines such as GLP-1, we expect related businesses to experience rapid growth.

Actively lay out overseas business, and differentiated solutions help achieve rapid growth in performance. Since 2022, the company's international business has focused on promoting the superior product line “going overseas”. With differentiated comprehensive solutions such as “reagent+consumables+equipment” and “reagent+instrument+technical service”, the international business continues to break through in North America, Europe, Southeast Asia and other regions. At the same time, the company's three major overseas warehouses in the US, Hungary and Singapore cover North America, Europe, and Southeast Asia, and front-end delivery efficiency continues to improve. The overseas market is expected to continue to contribute more impressive incremental performance to the company in the future.

Profit forecast and investment advice: Based on performance data, we adjusted the profit forecast. The company's revenue for 2024-2026 is 1.416, 1.779, 2.191 billion yuan (1.611, 2.062, 2.644 billion yuan before adjustment), up 10%, 26%, and 23% year-on-year; the company's net profit to mother is expected to be 0.033, 0.196, and 0.314 billion yuan (before adjustments of 0.056, 0.241, 0.43) billion yuan), a year-on-year increase of 147%, 493%, and 60%. The company's current stock price corresponds to 285, 48, and 30 times PE in 24-26. We believe that the company is in the early stages of rapid growth after transformation. The revenue scale and profitability are expected to rise rapidly under the continuous volume of major products. Incentives may disrupt or disrupt growth in the short term, and can give a certain valuation premium to maintain a “buy” rating.

Risk warning events: New product development risks, policy change risks, increased risk of market competition, etc. Public data used in research reports may be delayed or not updated in a timely manner.