after the session on January 30, huada zhizao (688114.SH) released its 2023 annual performance forecast. According to the company's preliminary calculation, the sales revenue of gene sequencer plate is expected to increase by about 30% year-on-year in 2023; the net profit of the parent company is -0.687 billion yuan to -0.578 billion yuan; and the net profit after deduction is -0.768 billion yuan to -0.646 billion yuan, which is a decrease compared with the same period of last year.

the announcement said that the reasons for the pre-loss of performance were mainly in three aspects: first, the net compensation of US $0.325 billion paid by Mina (Illumina) in the same period last year resulted in a large base in the previous period; Second, the gross profit contribution decreased due to the shrinking demand for laboratory automation products. Third, in order to maintain its advanced technology and global sales layout, the company's R & D and sales investment has increased. The announcement stated that BGI, based on R & D and production bases around the world, continues to invest in new products and new technologies, laying the foundation for subsequent companies to further expand diversified life science and biotechnology markets.

In 2023, as the market demand for new crown-related products decreased significantly, the revenue from epidemic-related products related to medical devices and the pharmaceutical industry decreased significantly, and the relevant companies made provision for impairment of the corresponding assets, which is a common phenomenon in the industry. Huada Zhizao also further stated in the announcement that, based on the principle of prudence, the Company has made provision for impairment of assets and credit impairment losses that may occur in 2023. However, Huada Zhizao seems to have gradually got rid of the impact of the above situation, and the public health impact is basically clear. In terms of dismantling business, its core gene sequencing sector sales revenue continued to increase, has returned to the normal growth logic. In the first three quarters of 2023, the company's various models of gene sequencers sold more than 640 new installed units worldwide, and the total installed capacity achieved sustained and rapid growth.

At the same time, the commercialization process and market expansion speed of BGI products are also growing at a high speed. In the domestic market, in recent years, the voice of domestic gene sequencers in the domestic market has been enhanced. According to Eggshell Research Institute statistics, as of December 31, 2023, a total of 25 high-throughput sequencers approved by NMPA, of which 15 are based on the DNBSEQ technology made by Huada Intelligence, the company's market recognition and status gradually improved. On December 11, 2023, BGI announced that it had reached a consensus on cooperation with Indonesia's National Research and Innovation Agency (BRIN) on platform construction and scientific research innovation. On December 29 of the same year, Nuohe Zhiyuan officially introduced the DNBSEQ-T7 sequencer made by BGI, and the company's customer territory continued to expand.

Adhering to the domestic base has laid the basic plate for the development of Huada Zhizao, with Chinese mainland and Hong Kong, Macao and Taiwan accounting for 62% of the gene sequencer business revenue in the first three quarters of 2023. Not only that, the company actively layout the global market, promote the four regional localization development, team building and channel layout. In the first three quarters of 2023, the company's gene sequencer business segment accounted for 17% of revenue in the Asia-Pacific region, 15% in Europe and Africa, 6% in the Americas, and all four regions achieved growth.

From the perspective of the biomedical sector where Huada Zhizao is located, the valuation and position of the overall sector are currently at historically low levels due to factors such as fluctuations in the external environment. As of January 30, 2024, the price-to-earnings ratio PE(TTM) of the Shenwan Pharmaceutical Bioindex is 25.35 times, which is close to a decade low in both absolute valuation and premium. In the past year, Huada Zhizao's share price has fallen nearly 43.3 per cent from its peak.

The research report of CITIC Construction Investment shows that the possible substantial impact of some events on the overseas business of enterprises in the industry should be viewed rationally and objectively. In the long run, the medical industry is expected to emerge from the global big companies. Among them, companies represented by Huada Zhizao have strong global competitiveness.