Event: Shengxiang Biology Releases 2023 Annual Report and 2024 First Quarter Report 2023, The Company Realized Operating Income 1.007 billion Yuan/-84.39; Net profit attributable to mother 0.364 billion yuan/-81.22%; Net profit after deducting non-return to mother is 0.072 billion yuan/-96.09%. Non-recurring gains and losses are mainly 0.287 billion investment income, mainly from the sale of 1.01% equity of Zhenmai Biology.

Business, respiratory tract, HPV, blood screening, sequencing and other areas to achieve market breakthroughs, sales revenue compared with the same period last year to achieve several times the growth, the early layout of remarkable results. Among them, the operating income of respiratory products exceeded 0.4 billion yuan, up 680 year on year. In the first quarter of 2024, the company achieved revenue of 0.391 billion yuan/plus 100.31%, net profit of 0.081 billion yuan/plus 35.01%, and non-return net profit of 0.074 billion yuan/plus 1962.06%.

profitability continued to improve, profit release is worth looking forward.

gross profit margin: thanks to the hot sales of respiratory tract multi-joint inspection products, the company's gross profit margin of diagnostic reagents increased to 88.40/+16.52pct, reaching a record high, driving the comprehensive gross profit margin to 71.54/+12.71pct. In the first quarter of 2024, the company's consolidated gross margin increased further to 81.10 percent.

expense rate: 2024Q1, the company's expense rate during the period was 56.29, down 12.28pct from 2023, and the sales/management/research and development expense rate was 30.63/15.85/14.17, down 4.96pct/2.95pct/5.32pct respectively. As the scale effect of the operation begins to appear and the adjustment of the team size is basically in place, the cost rate of the company is expected to decline further in the future, and the gradual release of the company's profits is worth looking forward.

respiratory testing product layout industry-leading, reagents for general-purpose fluorescent PCR instrument laid a good release basis.

Shengxiang biological in the field of respiratory pathogen detection product layout is very comprehensive, can provide the hospital from the outpatient department to the inpatient department, from a single inspection to multiple joint inspection of a full set of product pipeline. In the past, various companies have participated in respiratory testing, but most of them have been approved for fewer types. Before that, they did not regard it as a key business segment for development. The long-term commitment of Shengxiang Bio makes it in a leading position in the dimension of product layout. In addition, from the perspective of technical path, some competing products in the industry use special technologies such as capillary electrophoresis and constant temperature amplification chip, which need to be equipped with specific testing instruments. However, the two approved respiratory tract multi-inspection reagents of Shengxiang Biology are equipped with general PCR instruments, which well matches the instrument configuration of newly added molecular laboratories during the epidemic and lays a solid foundation for reagent admission and release.

product + brand, practice has proved that the company can occupy a dominant market position in the fierce competition.

the clinical examination center of Shanghai health and health Commission organized and implemented an inter-room quality evaluation (EQA) survey on nucleic acid detection of multiple respiratory pathogens at the end of 2022. From the results, among the 138 laboratories in 24 provinces, 120 laboratories have used reagents that have obtained NMPA registration, and the PCR fluorescent probe method is the main method, reflecting that the vast majority of laboratories are still Compliance and easy to operate. In terms of brand distribution, 97 laboratories use multi-detection reagents for respiratory molecules of Shengxiang Biology, accounting for 70%(97/138), reflecting that the company's products still occupy an absolutely dominant market position in the fierce competition track with reasonable target and platform design, excellent product performance and excellent sales ability.

from outpatient to hospitalization, from hospital to c, shengxiang creates a complete respiratory pathogen detection ecology.

Shengxiang Biology is one of the few enterprises in the industry that have multiple joint inspection products for upper and lower respiratory tract at the same time, and the products can be adapted to the mainstream general PCR platform at the hospital end. The company can realize the hospital end volume for its fist and main products. At the same time, the company has developed tNGS and mNGS testing services for respiratory pathogens based on its own sequencing platform, which can provide a variety of services including broad-spectrum pathogen diagnosis and drug resistance gene testing, covering the testing needs of respiratory pathogens at the hospital end. In addition, the company took the lead in the C- side, with the United States, Jingdong and other third-party shopping platform cooperation, is expected to further open up new growth space.

investment advice:

we expect the company's operating income from 2024 to 2026 to increase by 51.5, 31.6 and 26.0 respectively year on year. Net profit attributable to the parent increased by 0.2, 34.5 and 30.4 respectively year on year, with outstanding growth. For the first time, the investment rating of buy-a is given, with a 6-month target price of 24.78 yuan, equivalent to a dynamic price-earnings ratio of 40 times 2024.

risk tips:

the company's business development is not as expected risk, industry policy change risk, industry competition further intensified risk.