Key points of investment

Investment logic: The company mainly focuses on the field of allergy and self-exempt testing, and competes with other domestic immunological diagnosis companies. Due to factors such as the richness and complexity of testing programs and the low value of individual test items, allergy and self-exempt testing are dominated by specialized companies in mainstream markets such as Europe and the US. As a domestic allergy testing leader, the company's market share in 2019 was about 30%, and it has maintained a rapid growth trend in recent years. The compound annual growth rate of allergy reagent revenue in 2016-2019 reached 27.5%. Quantitative chemiluminescence testing products are being registered, and it is expected to help the company accelerate development after listing. In the self-exemption sector, foreign investment accounts for close to 80%. As one of the few domestic enterprises with chemiluminescence technology, the company currently has a market share of only about 4%. It is expected that import substitution will continue to be carried out in the future, and there is broad room for growth. Furthermore, the company has reached cooperation with both Jinyu Medical and Mindray Medical, which significantly enhances the company's competitiveness in the field of self-exemption and allergy testing.

The allergy diagnosis market is growing rapidly, and the company's competitiveness as a leader is outstanding: the global allergy diagnosis market was $3.49 billion in 2017 and is expected to reach $5.74 billion in 2022. Due to the low domestic allergy diagnosis rate, China's allergy diagnosis market was about 464 million yuan in 2018, which does not match the huge domestic patient population, and there is plenty of potential market space in the future. The company's market share in 2018 was 31%, ranking first among all companies. At present, the trend of domestic quantitative testing replacing qualitative testing has begun. The only domestic companies that have the capacity to mass-produce quantitative products are companies and Thermo Fly, and the company's price is only one-third of Thermo Fly products, and the cost performance advantage is obvious. In 2019, the company's quantitative products achieved revenue of 38.58 million yuan, an increase of 68.3% over the previous year. It is expected to become the company's main growth point for allergy products in the future. In addition, the company's chemiluminescence testing products are being registered, and it is expected that the company's leading position in the industry will be further strengthened in the future. We believe that the company's allergy revenue will grow at a compound annual rate of more than 30% in 2020-2022, and sales revenue is expected to reach 270 million yuan in 2022.

The self-exemption market is dominated by foreign investment, and chemiluminescent products are being imported and replaced by companies at an accelerated pace: the global autoantibody testing market was US$3.09 billion in 2017 and is expected to reach US$4.733 billion in 2022. In 2018, China's autoantibody testing market was about 1,157 billion yuan, and the market size is expected to reach 2.23 billion yuan in 2023. Currently, about 80% of China's market share is occupied by foreign investors. In 2018, the company's market share was 4%, so there is plenty of room for improvement. As one of the few companies that apply chemiluminescence technology to the field of self-exempt testing, the company's product technology is significantly ahead of fully automated ELISA quantitative testing products currently on the market, and it is expected that import substitution will continue to be achieved in the future. At the same time, the company reached a cooperation agreement with Mindray Medical, which is expected to further accelerate the release of reagents in the future through each other's strong brand influence and sales channels. We believe that the company's self-exempt testing revenue will grow at a compound annual rate of more than 35% in 2020-2022, and sales revenue in 2022 is expected to exceed 170 million yuan.

Profit forecast and investment rating: We expect the company's revenue for 2020-2022 to be 224 million, 344 million and 465 million yuan respectively, and net profit of the mother to be 56 million, 113 million yuan and 154 million yuan respectively. Corresponding to the EPS for the year 2020-2022 will be 0.89 yuan, 1.80 yuan and 2.45 yuan respectively. The corresponding valuations for the current stock price are 104X, 52X, and 38X, respectively. First coverage, giving a “buy” rating.

Risk warning: repeated risk of COVID-19; risk of worsening competitive pattern; risk of product development falling short of expectations.