Incident: The company released its 2024 three-quarter report. Revenue for the first three quarters was 3.38 billion yuan (yoy +4.24%), net profit due to mother 0.956 billion yuan (yoy +6.13%) deducted non-return net profit of 0.93 billion yuan (yoy +6.69%). In 2024, Q3's revenue was 1.173 billion yuan (yoy +3.38%), net profit due to mother 0.337 billion yuan (yoy -5.18%), after deducting non-attributable net profit of 0.332 billion yuan (yoy -3.99%).

The 24Q3 product structure continued to be optimized, and gross margin increased significantly. In terms of profitability, the gross profit margin in Q3 was 66.8%. Among them, the share of revenue from high-margin immunodiagnostic reagents increased, the share of revenue from low-margin COVID-related businesses declined, and the share of high-margin chemiluminescence instruments increased. The sales expense ratio for the third quarter of the single quarter was 15.6% (-0.1pp), the management expense ratio was 4.8% (+1.1pp), and the R&D expense ratio was 15.2% (+1.9pp). The company continuously strengthened R&D investment to ensure continuous development.

The 24Q3 performance was in line with expectations, and the impact of DRGs 2.0 was gradually implemented. Overall, 24Q1-Q3 is under pressure from unbundling packages, and there is some pressure on the revenue side. In 2024, the company's product line was improved, and the installed situation of stand-alone machines and assembly lines improved further month-on-month. Assembly line installations began to grow in May, which is an acceleration of domestic replacement.

The overseas chemiluminescence marketing network currently has 200+ agents, and network construction continues to advance.

Continued R&D and expansion into new fields, IVD platform enterprises are steady and far-reaching. The company continues to work hard in the field of reagent research and development, successfully developing a number of new series of products, and has obtained 60 new product registration (filing) certificates, covering magnetic particle chemiluminescence, chemiluminescence microparticle immunoassay, molecular diagnosis, etc. The testing projects cover autoimmune diseases, heart-related diseases, individualized medication, etc., enriching the company's product line and further enhancing the company's brand influence. In April 2023, the company's AutoLAS X-1 series assembly line finally stood out with its unique design concept and convenient use features, winning the 2023 German iF Design Award in one fell swoop. Through its high flexibility, the Autolas B-1 series assembly line enables seamless serial connection with various models of new instruments, enabling the 2000-speed biochemical analyzer to be freely expanded in series with the 600-speed and 200-speed immune analyzers, respectively. In terms of the layout of the NGS product line business, the company has established dual R&D centers in Zhengzhou and Shanghai, using the integration of “gene sequencing+big data” technology as a starting point to solidly promote the localization of the gene sequencing industry. The company's A1 and X1 installations in the first three quarters of 24 were in line with expectations.

Profit forecast and investment advice: The net profit for 2024-2026 is expected to be 1.44, 1.73, and 2.09 billion yuan, corresponding growth rates of 18.3%, 20.2%, and 20.9%, corresponding to PE of 18, 15, and 12 times. The valuation is relatively cost-effective. Considering the company's competitive advantages in technology, products, channels, and brands, future growth is outstanding, and maintaining a “buy” rating.

Risk warning: policy risk, increased risk of competition, risk of new product release falling short of expectations, risk of R&D progress falling short of expectations.