Incidents:

The company released its 2024 three-quarter report. 24Q1-3 achieved revenue of 1.394 billion yuan (YoY -9.78%), net profit of 0.219 billion yuan (YoY -23.29%), deducted non-net profit of 0.208 billion yuan (YoY +19.01%); 24Q3 achieved revenue of 0.434 billion yuan (YoY -7.69%), net profit of 0.046 billion yuan (YoY -68.21%), net profit of 0.046 billion yuan (YoY -68.21%) after deducting non-net profit 0.046 billion yuan (YoY +0.08%)

Comment:

1. Performance is under pressure in the short term, the non-COVID-19 self-production and light emitting business continues to grow, and breakthroughs in overseas markets have accelerated.

24Q1-3 non-COVID-19 self-produced business revenue was 1.14 billion yuan (+24.4%), self-produced luminescence revenue was 1.04 billion yuan (+29.2%), self-produced luminescence reagents +29.7%, including 0.15 billion yuan (+31.4%) of luminescence self-exempt reagents and +49.8% of myocardial marker reagents; agency business declined 17.8%. The share of the self-production business increased, especially the volume of special projects such as luminescence, self-immunity, and myocardial development, which led to the optimization of the company's product sales structure and increase in gross margin. The comprehensive gross margin of 24Q1-3 non-COVID-19 self-production reached 70.45% (+1.37pct), and the overall gross margin reached 63.69% (+10.32pct). By region, domestic non-COVID-19 self-produced revenue was 0.99 billion yuan (+22.2%), and luminescence revenue was 0.9 billion yuan (+27%), which slowed due to collection execution and channel inventory adjustments; overseas non-COVID-19 self-produced revenue was 0.15 billion yuan (+41.3%), and luminescence revenue was 0.13 billion yuan (+45.7%), of which luminescence reagents and consumables were +60%. With the gradual reduction of domestic inventory pressure, full release in collection regions, and continued breakthroughs in the international market, the company's Q4 performance is expected to improve month-on-month and return to high overall growth.

2. Accelerate installation of high-end machines+assembly lines, empowering major customers to continue to break through and drive reagent release. 24Q1-3, the company added 1,727 light-emitting machines, including 995 units in China (600-speed engines accounting for 46.4%), 732 overseas units, +53% (61 300-speed machines, +49% YoY); iFlash 9000 ultra-high speed machines were installed in total 1187 units; 61 new assembly lines were added, +74% over the same period last year, of which 24 were added in 24Q3. The accelerated installation of light-emitting instruments and assembly lines has driven domestic terminal medical institutions to cover more than 5,800, including more than 1,630 tertiary hospitals and more than 1,230 top three hospitals, with a coverage rate of 68.9%. In particular, assembly line installations are expected to accelerate the release of demand for reagents.

3. Increase sales and R&D investment, and promote new product launches and domestic and international sales promotion. 24Q1-3, the company's R&D rate is 16.5% (+2.6pct), and the sales rate is 21.5% (+3.3pct). It focuses on promoting the registration approval of high-end instruments such as iTLA Max assembly lines, iBC 2000 high-speed biochemists, and testing programs for self-immunity, myocardial disease, liver disease, etc., and product entry in Japan, the European Union, the CIS, the Middle East, etc.; at the same time, it is promoting academic promotion activities to promote the admission of instruments and clinical promotion of special projects. The Cairo service center has also been added to overseas markets, and the localization layout has been further improved.

Profit forecast: We expect the company's revenue for 2024-2026 to be 2.172, 2.767, and 3.516 billion yuan, respectively, with year-on-year growth rates of 5.77%, 27.41%, and 27.06% respectively, and net profit to mother of 0.405, 0.539, and 0.713 billion yuan respectively. The year-on-year growth rates are 14.04%, 33.22%, and 32.23%, respectively. Corresponding to the current stock price PE, it is 26, 19, and 15 times, respectively, maintaining the “recommended” rating.

Risk warning: Product development falls short of expectations, market competition intensifies, collection and implementation falls short of expectations, domestic and foreign market expansion falls short of expectations, installed capacity falls short of expectations, industry policy changes, etc.