Event: The company announced its 2023 three-quarter report. The first three quarters of 2023 achieved operating income of 10.292 billion yuan (-34.15%), net profit of 531 million yuan (-78.13%), net profit of 531 million yuan (-78.13%), and deduction of 482 million yuan (-80.01%).

In a single quarter, Q3 achieved revenue of 3.450 billion yuan (-29.25%), net profit of 78 million yuan (-85.84%), net profit of net income of 150 million yuan (-71.88%) after deduction of net profit of 150 million yuan (-71.88%).

Due to short-term pressure on Q3 caused by policy factors, various business sectors grew steadily in the first three quarters: on the revenue side, all business sectors grew steadily in the first three quarters, and diagnostic services achieved revenue of 4.08 billion yuan (+17.07%), of which ICL revenue was 3.711 billion yuan (+21.16%) and channel product revenue of 6.221 billion yuan (+6.07%), of which revenue from self-produced products was 329 million yuan (+30.56%). Looking at a single quarter, Q3 revenue growth has slowed, with diagnostic services revenue of 1,353 billion yuan (+5.62%), of which ICL revenue is 1,232 billion yuan (+10.01%), channel product revenue is 2.107 billion yuan, of which revenue from self-produced products is 100 million yuan (+9.89%). Our analysis believes that the slowdown in Q3 revenue growth is mainly due to medical policy disturbances. With the resumption of hospital activities, Q4 is expected to improve.

Expenses remained stable during the period, and payables were good: on the cost side, the company's sales/management/finance expenses in the first three quarters were 8.62%/6.32%/1.65%, respectively, up 1.45/0.01/0.22pct from the previous year. The cost side was relatively stable, despite a decline in apparent revenue, and cost control was good. In addition, the company's receivables situation is good. Accounts receivable for the first three quarters continued to improve. As of 2023Q3, accounts receivable were 9.390 billion yuan, a decrease of 275 million yuan from 2023H1.

Investment suggestions: We expect the company to achieve operating income of 137.39/159.17/18.373 billion yuan and net profit of 766/11.46/1,452 billion yuan in 2023-2025. The corresponding PE was 19.11/12.77/10.08 times, respectively, maintaining the company's “increased holdings” rating.

Risk warning: risk of industry demand falling short of expectations, risk of industry policy changes, risk of impairment of goodwill, risk of self-produced products falling short of expectations, etc.