performance preview

forecast that the profit side will turn to 5.78-0.687 billion yuan

the company forecast that the net loss attributable to the parent will be 5.78-0.687 billion yuan. the main reason for the year-on-year turn is that there will be no one-time litigation income in 2023, the demand for laboratory automation will decline, and the impairment of related assets will result in the profit side being slightly lower than the market expectation. In addition, the sequencer business grew by about 30% YoY, higher than market expectations.

focus on the main points

sequencer plate to cash steady development, profit end turn loss. 1) Steady development of the sequencer sector: According to the announcement, the company's gene sequencer sector sales revenue increased by about 30% year-on-year in 2023, higher than market expectations, continuing the steady development trend. 2) Profit-side loss: The company has accrued asset impairment loss and credit impairment loss of 0.274 billion yuan. After excluding this part of impairment, the internal operating loss is 3.04~0.413 billion yuan. We expect or mainly related to the new crown-related business. At the same time, the company will actively implement the internationalization strategy in 2023. The increase in the number of global marketing personnel will lead to higher sales expenses, which will lead to profit-side loss year-on-year.

global supply chain system gradually improved. According to the 1H23 semi-annual report announcement, the gene sequencer and sequencing reagent production line of China Dazhi's production base in Riga, Latvia, was officially opened in 2023. In November 2023, Complete Genomics, a US subsidiary of BGI, announced plans to invest US $3.2 million to build a manufacturing base 1 in San Jose, California, USA, becoming the second manufacturing base overseas after the construction of a manufacturing base in Latvia. The supply chain system is gradually improving.

continuous expansion of global cooperation ecosystem. According to the company's official public number, in December 2023, Beijing Nuohe Zhiyuan Company and Huada Zhizao signed a cooperation agreement, Nuohe Zhiyuan will introduce Huada Zhizao DNBSEQT7 gene sequencer 2 to support the innovative application of molecular breeding technology. In addition, on December 3, 2023 and January 4, 2024, Huada Zhizao reached cooperation with Genos Médica, a Mexican genomics professional center, TCL Group, a Chilean laboratory equipment company, and Gencove, an American gene sequencing company. We believe that with the end of global patent friction and the gradual improvement of the supply chain system, the company's overseas business is expected to usher in accelerated development, and the process of commercialization at sea deserves attention.

profit forecast and valuation

considering that the company is in a period of rapid business development and still needs various expenses in the short term, we lowered our 23/24 profit forecast from profit 0.05 billion yuan/0.151 billion yuan to loss 0.588 billion yuan/0.173 billion yuan, introducing a 25-year profit forecast of 0.022 billion yuan for the first time. Considering the company's domestic and overseas sequencer installed share continued to increase, the follow-up is expected to drive reagent release and contribute to long-term competitiveness, we temporarily maintain the win-win industry rating and 110 yuan target price (based on DCF valuation switch to 2024 valuation), implied 65% upside space.

risk

geopolitical friction risk, downstream application demand is less than expected, industry competition intensified.