Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 394 million yuan, an increase of 5.49%; realized net profit of 121 million yuan, an increase of 8.67% over the previous year; and realized net profit of 121 million yuan without return to mother, an increase of 10.91% over the previous year.

Comment:

Gross margin increased slightly, and profitability was further enhanced: 24 Q1 achieved operating income of 394 million yuan (YOY +5.49%), realized net profit of 121 million yuan (YOY +8.67%), and realized net profit of 121 million yuan (YOY +10.91%) after deduction of non-return to mother. The 24Q1 company's gross margin increased 2.25pp year on year to 76.86%; the sales expense ratio decreased 2.68pp to 17.7% year over year; the financial expenses ratio decreased 0.54 pp to 2.71% year over year; management expenses increased 1.81 pp to 8.65% year over year, mainly due to increased depreciation due to the transformation of projects under construction and an increase in amortization expenses due to equity incentives; the period expense ratio decreased by 0.22pp to 39.95%, further improving profitability.

R&D intensity continues to increase, and chemiluminescence products are brought to market: 24 Q1 R&D expenses were 43 million yuan, up 18.41% year on year, and R&D cost rate increased 1.19pp to 10.89% year on year. In 24Q1, the company and its wholly-owned subsidiaries added a total of 2 invention patents, 2 medical device registration certificates, and 24 medical device filing certificates. In March 2024, at the CACLP conference, the company's chemiluminescence system was officially released. Fully automated chemiluminescence immunoanalyzers Gi1600, Gi2000, Gi9000 and other products are expected to further enrich the company's business line and create performance growth points.

Acquire part of Longjin Biotech's shares to expand and strengthen the pathology platform: 24 Q1 Maixin Biotech, a wholly-owned subsidiary of Jiuqiang Biotech, announced a capital increase of 32 million yuan to Longjin Biotech. After the capital increase was completed, Maixin Biotech held 25.21% of Longjin Biotech's shares. In March, Maxine Biotech and Longjin Biotech jointly released the FISH series of molecular diagnostic products. Longjin Biotech's main business focuses on the field of tumor molecular pathology diagnosis. The capital increase for Longjin Biotech will help Maixin Biotech supplement its product line and further help Jiujiang Biotech become an IVD platform enterprise.

Profit forecasting, valuation and rating: We are optimistic about the progress of the company's new strategic development plan and the continued empowerment of Sinopharm. We maintain the 2024-2026 net profit forecast of 6.30/7.63/920 million yuan. The current price corresponds to the 24-26 PE of 17/14/11 times. Considering that the company's overseas pathology business and the expansion of the new luminescence business contributed to the company's continuous development, we maintain the company's “buy” rating.

Risk warning: Risk of price reduction exceeding expectations, risk of changes in sales models, risk of new product development and listing progress falling short of expectations, and risk of stock price instability due to irregularities.