Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 4.444 billion yuan (+0.05%), net profit attributable to mother of 1,217 billion yuan (+4.28%), deducted non-net profit of 1,185 billion yuan (+5.86%), and operating cash flow of 1.47 billion yuan (-5.68%). The 2023 dividend plan is 10.5, with a dividend rate of 50.01%, and a calculated dividend rate of 1.84%. 2024Q4 achieved operating income of 1.01 billion yuan (+3.54%), net profit attributable to mother of 317 million yuan (+17.86%), after deducting non-net profit of 313 million yuan (+20.61%). 2024Q1 achieved operating income of 1,089 million yuan (+5.09%), net profit to mother of 324 million yuan (+33.93%), deducted non-net profit of 314 million yuan (+33.15%), and operating cash flow of 328 million yuan (+61.21%).
The full year 2023 results are in line with expectations. The company's apparent revenue and net profit growth was weak in 2023, mainly due to the high base due to sales of COVID-19 testing products in the same period in 2022, and a slowdown in the pace of product admission due to policy changes. Excluding the impact on revenue related to COVID-19 testing, the company's annual revenue increased 16.64% year over year.
As of 2023, the company's products have reached more than 6,700 end users in level-II hospitals (including more than 2,200 level-III hospitals, accounting for 61.90% of the country's total tertiary hospitals). At the same time, the company's overseas business maintained rapid growth, achieving annual revenue of 209 million yuan (+60.53%).
Rapid growth in core business led to an improvement in revenue structure, and 2024Q1 performance greatly exceeded expectations. 2024Q1's apparent profit increased sharply. Apart from the low 2023Q1 base (including asset impairment losses of 27.26 million yuan), it is mainly expected that the company's core businesses such as chemiluminescence and molecules will grow rapidly, which will drive the 2024Q1 gross margin increase of 3.46 pct to 64.52%, and the net margin increase by 6.33 pct to 30.18%. Excluding impairment losses, 2024Q1 profits still grew endogenously by around 20%. In terms of period expenses, the sales expenses ratio is 16.60% (+0.15pct), the R&D expenses ratio is 13.88% (-0.83pct), and the management expenses ratio is 4.27% (-0.20pct).
We believe that in the future, the company's profitability is expected to continue to improve as assembly lines and high-end models are successfully installed, leading to the rapid growth of chemiluminescence reagents and the rapid growth of superimposed molecules and microbiology businesses.
Investment in R&D is driving production lines to continue to be abundant, and it is expected to enter an intensive harvest period. The company's R&D intensity once remained at the leading level of the industry. In 2023, it invested 656 million yuan in R&D (accounting for 14.77% of revenue), and invested 151 million yuan in R&D in 2024Q1 (accounting for 13.88% of revenue). ① Chemiluminescence: 60 new product registration (filing) certificates, covering autoimmune diseases, heart-related diseases, individualized medication, etc.; ② Biochemistry: 800-speed AutoChem B801 series obtained medical device registration certificate; ③ Coagulation: partner Hiken Medical's fully automatic coagulation analyzer AutoSimoc6000 launched; ④ Sequencing: the wholly-owned subsidiary SikuBiotech's Siku2000 series was launched in the non-clinical field; ⑤ Mass Spectrometry: Autofms series of fully automated microbial mass spectrometry testing systems received the European Union IVDR in China First certification; the development of the triple quadrupole liquid-quality combined system is progressing steadily according to the plan. Performance testing and inspection of the mass spectrometry system have been completed in 2023, and the progress is in line with expectations.
Internal and external factors resonate, and there is strong certainty that performance will continue to grow. 1) Domestic: Collection promotes the accelerated implementation of domestic substitution. The company's domestic revenue in 2023 was 4.159 billion yuan (-1.82%), with a gross profit margin of 67.39% (+5.49pct). Previously, in Anhui chemiluminescence harvesting, the company ranked first in the eight infectious disease reports. The price reduction was relatively moderate, based on the fact that domestic manufacturers have a certain advantage over imports. In the future, with the implementation of collection and implementation, the scope of projects involved will expand further. It is expected that more and more imported product dealers will fully benefit from the transformation to domestic products due to their own profit margin considerations. 2) Overseas: In 2023, the company's overseas revenue was 209 million yuan (+60.53%), gross profit margin 37.81% (+15.98pct). At present, the company's products have entered many regions such as the Middle East, Asia, Europe, America, and Africa. Although the company's overseas business volume is still small, with the restructuring of overseas business departments and the continuous cultivation and expansion of the dealer team (it has cooperated with more than 120 dealers as of 2023), the international market is expected to contribute significant performance increases in the future.
Investment advice: The company is a domestic chemiluminescence leader. The expansion of all categories with fully automatic assembly lines as the core supports the company's future sustainable development, and there is strong certainty about rapid endogenous growth. We expect the company's net profit to be 15.53/19.39/2.389 billion yuan in 2024-2026, up 27.56%/24.85%/23.21% year-on-year, and EPS 2.65/3.31/4.08 yuan respectively. The current stock price corresponds to 2024-2026 PE 20/16/13 times, maintaining the “recommended” rating.
Risk warning: Risk of drastic reduction in chemiluminescence reagent collection prices, risk of domestic competition increasing and installation progress falling short of expectations, risk of new product development progress falling short of expectations.