Introduction to this report:
All three main businesses have grown, mass spectrometer sales have entered the release stage, products under development have achieved phased results, and the organic analytical instrument product line layout has been expanded. Equity incentives have entered the assessment period, and subsequent growth can be expected.
Key points of investment:
Maintain an “Overweight” rating. Due to the decline in the net profit base in 2023 and the long research and development cycle of analytical instrument technology, we lowered the company's projected net profit for 2024-2025 and increased by 0.38 (previously 0.53) /0.56 (previously 0.84)/79 billion yuan, respectively. According to comparable companies, the company was given 4 times P/S in 2024, and the target price was reduced to 29.19 yuan (originally 50.19 yuan). Maintain an “Overweight” rating.
Revenue from all three major businesses increased in 2023, and results fell slightly below expectations due to a slight decline in gross margin compounded by impairment of goodwill. 1) In 2023, the company achieved revenue of 416 million yuan, a year-on-year increase of 17%; net profit to mother was 27.56 million yuan, a year-on-year decrease of 38%. The reason for the increase in revenue was the year-on-year increase of 15%, 11%, and 10% for laboratory analytical instruments, clean and environmentally friendly laboratory solutions, and consumables and services, respectively. Due to market price competition and depreciation of new product lines, the overall gross margin declined slightly, compounded by the impairment of CDS's goodwill, and the 2023 results were slightly lower than expected. 2) 2024Q1 achieved revenue of 105 million yuan, a year-on-year increase of 9%; net profit to mother was 11.57 million yuan, a year-on-year decrease of 10%, which is basically in line with expectations.
High-end ICP-MS/MS mass spectrometers have been delivered, expanding the organic analytical instrument product line layout. 1) Mass spectrometer: Sales of quadrupole mass spectrometers increased 167% year on year, entering the release stage. ICP-MS/MS delivery has been implemented. The ICP quadrupole-time-of-flight mass spectrometer has been verified in practical applications by customers in the semiconductor industry. 2) Gas chromatography-mass spectrometer: Two single-quadrupole mass spectrometer principle prototypes have been completed and successfully started, broadening the organic instrument product line layout on the basis of full coverage of the inorganic product line.
The first assessment of equity incentives has been completed, and growth can be expected from 2024-2025. The target values for the 2023 assessment of the equity incentive plan have been completed. The target operating income or net profit growth rates for the 2024 and 2025 vesting period assessments are not less than 30% and 45%, respectively, and the company can be expected to grow in 2024-2025.
Risk warning: the risk of technology iteration, the risk of changes in subsidy policies.