Incident: On October 25, the company released its report for the third quarter of 2024: operating income of 2.181 billion yuan in the first three quarters of 2024, up 8.83% year on year; net profit to mother was 0.436 billion yuan, up 9.04% year on year; net profit after deducting non-return to mother was 0.388 billion yuan, up 14.88% year on year.

Among them, revenue for the third quarter of 2024 was 0.606 billion yuan, up 17.51% year on year; net profit to mother was 0.08 billion yuan, up 22.70% year on year; net profit after deducting non-return to mother was 0.063 billion yuan, up 49.89% year on year.

The global layout has accelerated, COVID-19 single tests and fentanyl test reagents have obtained FDA registration certificates. The overall overseas qualitative business of the International Department has remained relatively stable, and the quantitative business has achieved rapid growth. The company has achieved rapid growth by digging deep into channels on overseas fluorescence platforms to seize market terminals. In the first three quarters of 2024, single-use luminescence was promoted rapidly in overseas markets, achieving significant year-on-year growth. The revenue and share of quantitative platforms has increased dramatically, and the comprehensive installation of instruments has led to rapid growth in test reagents.

In the North American market, the company continues to promote registration and certification of core products such as drug tests and infectious diseases.

In the second half of 2024, the company's fentanyl urine test reagent POC professional version and home self-test OTC products received US FDA 510 (k) approval, which strongly supports dealing with the drug abuse crisis in the US and the world; the novel coronavirus home testing (OTC) products developed by the company successfully passed the US FDA 510 (k) approval, further enriching the product range and helping to expand the business.

The domestic business showed strong resilience. The 900-speed chemiluminescence installed capacity exceeded expectations. In terms of domestic quantitative business, the domestic hospital quantitative business increased slightly year-on-year in the third quarter of 2024.

Among them, the chemiluminescence business grew rapidly year on year. In the first three quarters of 2024, the installed progress of the 900-speed chemiluminescence high-speed engine exceeded expectations, and the 200-speed instrument's installation speed was in line with the target scheduled for early 2024. Despite the influence of policy factors on the industry's reagent consumption, the yield levels of the company's 900-speed and 200-speed instruments are above average in the same industry.

In terms of domestic qualitative business, the colloidal gold platform achieved rapid year-on-year growth in the third quarter of 2024. Progress has exceeded the business pace scheduled at the beginning of the year. Sales revenue is expected to increase further after the peak of respiratory infections in the fourth quarter.

The financial expense ratio increased slightly due to exchange profit and loss. Profitability increased year-on-year in the first three quarters of 2024. The company's comprehensive gross margin increased 0.59pct to 63.43% year over year, mainly due to product structure optimization, increased chemical luminescence sales share, scale effects brought about by sales scale expansion, and the combined effects of the company's lean management of production to cope with collection. The sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 21.64%, 7.02%, 12.43%, and 0.66%, respectively. The year-on-year changes were -1.61 pct, -0.50 pct, -0.52 pct, and +1.22 pct, respectively.

Among them, the financial expense ratio increased significantly, mainly due to exchange losses due to exchange rate changes.

Under the combined influence, the company's overall net interest rate increased by 0.32pct year-on-year to 20.16%.

Among them, the comprehensive gross profit margin, sales expense ratio, management expense ratio, financial expense ratio, and overall net interest rate for the third quarter of 2024 were 61.07%, 25.33%, 7.56%, 12.19%, 3.33%, and 13.45%, respectively, with changes of +0.30pct, -3.84pct, -1.07pct, -1.14pct, +2.92pct, and +0.87pct, respectively.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 3.101 billion/ 3.796 billion/ 4.62 billion yuan, with year-on-year growth rates of 12%/22%/22%, respectively; net profit to mother of 0.638 billion/ 0.782 billion/ 0.982 billion yuan, respectively; growth of 31%/23%/26%, respectively; EPS of 1.32 /1.62 /2.04, respectively. The closing price on October 29, 2024 corresponds to 19 times PE in 2024. Maintain a “buy” rating.

Risk warning: R&D risk of innovative technology and products, risk of loss of core technical personnel, risk of management of business channels, risk of product quality and potential liability, risk of market competition.