Incidents:

The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 1.869 billion yuan (yoy -15.19%), net profit to mother of -0.463 billion yuan, deducted non-net profit of -0.497 billion yuan, and operating cash flow of -0.85 billion yuan.

In the third quarter of 2024, the company achieved operating income of 0.66 billion yuan (yoy -13.22%), net profit to mother of -0.165 billion yuan, deducted non-net profit of -0.173 billion yuan, and operating cash flow of -0.273 billion yuan.

Incident reviews

2024Q3 Revenue side is under pressure, and spending continues

The company achieved revenue of 0.66 billion yuan (yoy -13.22%) in the third quarter of 2024, and revenue growth is still under pressure. It is expected to be related to the continued weakness of domestic research budgets and clinical non-rigid medical demand. At the same time, compounded by geopolitical friction and disturbances, it will still take time to expand overseas regions.

In terms of period expenses, in the third quarter of 2024, the company's sales, management, and R&D expenses were 0.224 billion yuan, 0.154 billion yuan, and 0.182 billion yuan respectively, accounting for 33.99%, 23.36%, and 27.52% of revenue, respectively, up 8.95%, 23.10%, and -13.53% year-on-year respectively. Expenses were relatively large and normalized during the company period.

We expect domestic demand to pick up in the short term. Focus on the company's long-term market competitiveness. In the short term, the trend of domestic substitution in the domestic market is strengthening, and the company's share in the domestic market continues to increase. The large-scale equipment renewal policy led by the Development and Reform Commission and other departments in 2024 also involves scientific research equipment. It is expected that demand from some universities and laboratories will be released, which will help the company's domestic revenue growth to pick up.

In the long run, through long-term high investment in R&D, the company has now become one of the few institutions in the world with sequencers with three different technology routes: stimulated light, self-emitting, and non-luminescent, and has strong market competitiveness. In overseas markets, the company has established 9 global R&D centers, 7 production bases, 9 international warehouses, and more than 10 customer experience centers to continuously strengthen the overseas business layout. In the future, once various technology application scenarios such as downstream genomics, cytomics, and spatial omics continue to emerge, the company will gain more market space.

Investment advice

We expect the revenue side of the company to achieve 2.727 billion yuan, 3.181 billion yuan, and 3.726 billion yuan respectively in 2024-2026 (previous value was 3.146 billion yuan, 3.766 billion yuan, 4.512 billion yuan), year-on-year increases of -6.3%, 16.6%, and 17.1%, respectively. Net profit to mother is expected to achieve -0.395 billion yuan and -0.197 billion yuan in 2024-2026 billion yuan, 0.008 billion yuan (previous values were -0.317 billion yuan, -0.191 billion yuan, 0.117 billion yuan), and year-on-year losses were 35.0%, 50.2%, and 104.1%, respectively. EPS corresponding to 2024-2026 is about -0.95 yuan, -0.47 yuan, and 0.02 yuan, respectively. Considering that the company is a leading enterprise in the field of global genetic sequencers, there is plenty of room to increase its share in overseas markets in the future. Despite facing risks such as international geopolitics, the scarcity of assets is high. Once the downstream application market opens, the market space is very broad and maintains a “buy” rating.

Risk warning

Market competition heightens risk.

geopolitical risk.