The apparent performance was affected by the income base of molecular diagnostic reagents, and the net profit of homing decreased by 57% compared with the same period last year.

2023H1 realized revenue of 1.381 billion (- 22.5%), net profit of 175 million (- 56.9%) and non-return net profit of 178 million (- 55.4%). Among them, the revenue in the second quarter was 704 million (- 17.8%), the net profit of return to home was 58 million (- 71.6%), and the net profit of non-return was 58 million (- 70.9%). Due to the rapid change in market demand, the sales of COVID-19 molecular diagnostic products decreased significantly, and the sales income of molecular diagnostic reagents in the first half of the year was 5.71 million yuan (- 98.6%). In addition to the reduction of gross profit contribution of molecular diagnostic reagents, the company provides for impairment of related inventory, resulting in a significant decline in net profit due to multiple factors.

Excluding COVID-19, independent products maintain good growth and speed up the adjustment of agency products. The income of 2023H1 independent products is 867 million yuan (- 23.7%), and after excluding molecular diagnostic reagents, the revenue increases by 16.0% year on year, maintaining a good growth trend. This year, the company vigorously promotes the intelligent inspection and analysis lines in the whole laboratory and cooperates with the terminal installation of individual machines on various platforms. in the first half of the year, the market end of independent large-scale instruments reached 1601 (articles), of which there are 169production and blood production lines. after the instrument is installed, it is expected to continue to drive the consumption of follow-up reagents. The revenue of the agency business in the first half of the year was 496 million yuan (- 20.8%), and the proportion of revenue further dropped to 359%. The cost advantage of the company's own products is much higher than that of agency products, and with the change of domestic policy trends and business environment, the profitability and sustainability of agency business will be affected to a certain extent.

The gross profit margin fell slightly, and the rate of sales and R & D expenses further increased. The gross profit margin of 2023H1 was 53.4% (- 1.0pp), mainly because the gross profit margin of agency products fell 3.9 percentage points to 21.4%. Sales expense rate 20.7% (+ 5.0pp), management expense rate 5.0% (+ 1.4pp), R & D expense rate 9.3% (+ 3.5pp), financial expense rate 0.6% (- 0.3pp). The company further expanded the coverage of the marketing service network and continued to increase R & D. in the first half of the year, the company invested 164 million yuan (+ 32.8%) in R & D and 41 new R & D projects. the company has a systematic competitive advantage in the construction of immune and other product platforms and automation assembly lines. Due to the increase in expense rate and the impact of asset impairment, the net interest rate fell to 12.4% (- 10.6pp) in the first half of the year.

Investment suggestion: considering the impact of the company's accelerated strategic transformation and provision for impairment of specific inventory assets, it is estimated that the 2023-25 net return to the parent is 4.98 million yuan, with a year-on-year growth rate of-29.7 percent, 34.5 percent and 23.7 percent; diluted EPS=0.81/1.09/1.35 yuan, and the current share price corresponds to PE=19/14/11x. The company's business covers nine major platforms, such as biochemistry, immunity and blood cells, with new products coming out one after another, vigorously promoting the intelligent inspection and analysis line of the whole laboratory, and accelerating the strategic adjustment of agency business and direct sales transformation and distribution. Combining absolute valuation and relative valuation, the reasonable share price of the company is 17.82-19.44 yuan, which is 16.8-27.4% premium over the current share price (23-08-03). It is covered for the first time and given a "buy" rating.

Risk hints: the risk of price reduction in the collection of in vitro diagnostic reagents, the lower-than-expected research and development, and the increased risk of competition.