The company released 2022 annual report: 2022 income 465 million yuan, year-on-year + 5.3%; return to the mother net profit 162 million yuan, year-on-year + 23.9%; deducting non-return net profit 139 million yuan, + 10.9% year-on-year. The company continues to maintain good growth in the field of medical devices, and the expense rate remains stable.

The continuous distribution of medical devices will drive the steady growth of the profit end. The company's gross profit margin declined slightly in 2022, the expense rate remained stable, and the layout of medical device products continued to drive profit-side growth.

The income of medical devices reached 263 million yuan, + 24.1% over the same period last year. The decline in gross profit margin is expected to be due to changes in product structure caused by customer demand. The United States is the world's largest market, accounting for 40% of disposable consumables sales. The company continues to obtain overseas approvals, with 26 FDA approvals (2 more than 2022Q3 and 4 in the declaration stage) and 28 CE certifications, which is in a leading position in China.

The income of animal equipment reached 158 million yuan, + 1.8% compared with the same period last year. In Europe and the United States, the degree of intensive animal husbandry is high, the demand for pet diagnosis and treatment is large, and the diagnosis and treatment equipment and technology are mature, which make the industry highly concentrated. With the improvement of domestic animal husbandry scale and pet diagnosis and treatment demand, the domestic animal equipment market is expected to increase rapidly. As vaccine injection is a rigid demand, the demand for matching animal equipment products will increase in the same amount.

The income of laboratory consumables reached 40.85 million yuan,-45.4% compared with the same period last year, mainly due to the decline in demand for virus sampling tubes related to the epidemic. Due to the high gross profit margin of this product, the gross profit margin of laboratory consumables business has also declined. With the national attention to the biological laboratory consumables industry and the increasing demand for import substitution, domestic brands are expected to break the dominant position of foreign investment, and the market share is expected to increase.

Production capacity construction to improve product quality and efficiency, quality control advantage to establish the company's leading position. The company has a production workshop of more than 68000 square meters, of which the 100, 000-level purification workshop that meets the GMP standard reaches more than 40, 000 square meters. Chenglu Road Phase II plant is expected to be completed and put into production in 2023, the layout of the product line covers safety insulin stylus, safety blood collection needle, pre-filling syringe and other safety products, after the completion of construction will effectively improve the company's production quality and efficiency. The wholly-owned subsidiary of the company adopts the inspection that it has obtained CNAS certification and CMA certification, and the testing capability covers all the routine control indicators of the product, ensuring that the company is in a leading position in the industry.

R & D is committed to enriching the product matrix while improving production efficiency. The company is firmly at the forefront of R & D and innovation in the industry, and has set up a R & D system with the enterprise technology center as the core and facing the market demand. There are 98 R & D personnel, which is + 18.1% compared with the same period last year. The increase in R & D personnel has promoted 10 ongoing projects including new product research and development and process improvement.

New product research and development focuses on expanding the product line, improving product competitiveness, and process improvement to further improve production efficiency.

Maintain the "highly recommended" investment rating. We are still optimistic about the company's development strategy with high-quality customers as the core, and continue to strengthen the company's advantages in manufacturing, product research and development, customer service, and so on. From 2023 to 2025, we predict that the company will achieve a net profit of 2.03, 273, 369 million yuan, EPS, 2.91 and 3.93 yuan, respectively, and the corresponding PE will be 24, 18, and 13X, respectively. Maintain the "highly recommended" investment rating.

Risk hint: capacity expansion is less than expected risk, business expansion is not as expected risk, and so on.