Matters:
The company released its annual report for the year 23, with operating income of 3,930 billion yuan (+28.97%), net profit attributable to mother of 1,654 billion yuan (+24.53%), after deducting non-net profit of 1,547 billion yuan (+24.72%). In the fourth quarter of a single year, the company's revenue was 1,022 million yuan (+36.16%), net profit attributable to mother was 467 million yuan (+15.77%), after deducting non-net profit of 446 million yuan (+14.98%).
Commentary:
The domestic equipment system has been upgraded, and breakthroughs in tertiary hospitals have accelerated. Domestic main business revenue was 2,601 billion yuan (+25.53%). With the increase in sales volume of large-scale light-emitting instruments and assembly line related products, domestic instrument business revenue increased 33.53% year-on-year, higher than the overall domestic growth rate. The domestic installed capacity was 1,465 units, of which large equipment accounted for 63.34%. Revenue from the domestic reagent business increased by 23.73% year on year. It is expected that with the cumulative installed capacity of large-scale equipment and assembly lines, the domestic reagent business will maintain steady growth. The number of tertiary hospitals served by the company in 23 years increased by 155 compared to the end of 2022. It has provided services to 1,535 tertiary hospitals. Among them, the number of customers from the top three hospitals increased by 67, and the coverage rate of the top three hospitals in China reached 57.46%.
The share of overseas medium and large equipment increased, and the reagent business accelerated. The company's overseas main business revenue was 1,319 billion yuan (+36.16%) in '23, and continued to grow at a high rate. In '23, the company sold 3,564 light-emitting devices overseas, and the sales share of medium and large light-emitting instruments increased to 56.73% (+20.19pct), and overseas instrument revenue increased 16.91% year-on-year. With the rapid increase in the number of installed machines in overseas markets and the continuous increase in the share of medium and large machines, the company's overseas reagent business revenue increased 54.56% year on year in '23. Since '23, the company has established 4 new wholly-owned overseas subsidiaries in Italy, Romania, Saudi Arabia, and Indonesia. Currently, the company has set up 10 wholly-owned overseas subsidiaries.
The gross margin has increased steadily, benefiting from equipment upgrades and an increase in the share of reagents. As the share of sales of X series and medium to large light-emitting instruments increased, the gross margin of the company's instrument products increased to 29.70% (+6.60pct). At the same time, the high-margin overseas reagent business grew rapidly, accounting for 58.04% (+6.91pct) of overseas revenue, which in turn led to the gross margin of the main overseas business reaching 65.73% (+9.86pct), and the overall gross margin of the company's main business increased to 73.15% (+2.65pct). The company's sales expense ratio for 23 years was 16.04% (+0.98pct), the R&D expense ratio was 9.31% (-1.12pct), the management expense ratio was 2.72% (+2.56pct, due to the return of equity incentive expenses in '22), the financial expense ratio was -0.78% (+1.60pct, due to changes in exchange profit and loss), and the net profit margin to mother was 42.08% (-1.50pct).
Investment advice: Based on the 23-year performance, we expect the 24-26 company's net profit to be 20.8 billion yuan, 2.65 billion yuan, and 3.34 billion yuan, respectively, up 25.5%, 27.4%, and 26.5% year-on-year (the original forecast values for 24-25 were 21.2 billion yuan and 2.72 billion yuan, respectively), corresponding to the 23-25 EPS of 2.64, 3.37, and 4.26 yuan, respectively. Referring to comparable companies, we gave the company a 30-fold valuation in 2024, corresponding to a target price of about 79 yuan.
Risk warning: 1. IVD collection price reduction exceeds expectations; 2. Overseas business expansion falls short of expectations.