Hua 'an Securities Co., Ltd. Tan Guochao and Li Chan recently conducted research on Huada Zhizao and released a research report entitled "Rapid Growth of Gene Sequencing Business Q2 and Opening of Overseas Markets". This report gives a buy rating to Huada Zhizao and the current share price is 80.81 yuan.

Huada Zhizao (688114)

Main points:

Events:

The company released its semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 1.44 billion yuan (yoy-38.9), net profit of return -0.1 billion yuan (yoy-128.5), and net profit of non-return -0.14 billion yuan (yoy-139.5). 2023Q2 Company realized revenue of 0.82 billion yuan (yoy-27.7) and net profit of 0.05 billion yuan (yoy plus 3319.7%).

Event reviews

Domestic and foreign markets are making concerted efforts. The revenue growth rate of the gene sequencer sector in the first half of the year is about 40%, and the company's gene sequencing sector has achieved operating income of about 1.1 billion yuan in the first half of 2023, accounting for 76.39 of the company's overall revenue, with a year-on-year growth rate of about 39.9. We expect the company's 2023Q2 gene sequencing sector revenue of about 0.67 billion yuan, up about 67% YoY, compared to 2023Q1 growth of about 55%.

in the first half of 2023, the total number of new global sales installed capacity of the company's various models of gene sequencers increased by 63% year-on-year. As of June 30, 2023, the company's cumulative sales of installed capacity of more than 2910 units, we expect the company's new sales of installed capacity of about 400 units in the first half of 2023, for the subsequent increase in customer reagent consumption laid the foundation.

in addition, the company's gene sequencer sector is divided according to income regions, with mainland China and hong kong, Macao and Taiwan regions realizing income of 0.7 billion yuan (yoy +36.4%); Asia Pacific region realized income of 0.18 billion yuan (yoy + 11%); Europe and Africa realized income of 0.14 billion yuan (yoy +83.6%); The income of the Americas was 74.405 million yuan (yoy +141.3). Except for the Asia Pacific region, which was affected by the large orders delivered in the same period last year in 2023Q1, other regions maintained high business growth. Since January 2023, when the company's full range of products went on sale in the United States, revenue in the United States has grown rapidly, pushing the share of sequencing revenue in the Americas to 7% in the first half of 2023, and also pushing the company's share of sales in overseas markets to increase simultaneously.

The company's globalization strategy is based on localized cooperation. Currently, the company has built 7 comprehensive bases and 8 customer experience centers around the world. In the first half of 2023, the company focused on the global front-end team building, Asia-Pacific, Europe and Africa, the Americas have reached 150-200 people.

Continuously enhance R & D innovation and improve the layout of ultra-high throughput and low throughput models

in the first half of 2023, the company's product iteration was smoothly updated. the company released ultra-high throughput sequencer DNBSEQ-T20 × 2, further reducing the sequencing cost and reducing the cost of single-person whole gene sequencing to less than us $100. High-throughput flagship machine DNBSEQ-T7 product upgrading, further improving chip density, sequencing speed and shortening sequencing time; Small and medium-sized flux gene sequencers DNBSEQ-G99 released PE300 sequencing reagents, with flux coverage upgraded to 8-96Gb, provide more choices for customers such as 16S/18S/ITS sequencing mode and related microbial functional gene research.

Investment advice

combined with the company's latest announcement, we expect the company's annual revenue from 2023 to 2025 to achieve 3.117 billion yuan, 4.041 billion yuan and 5.224 billion yuan respectively (the previous values were 3.895 billion yuan, 4.717 billion yuan and 5.963 billion yuan respectively), with year-on-year growth of -26.3, 29.6 and 29.3 respectively, 2023-2025 home-to-home net profit is expected to achieve 0.095 billion yuan, 0.187 billion yuan, 0.307 billion yuan (previous values of 0.311 billion yuan, 0.389 billion yuan, 0.51 billion yuan), year-on-year growth of -95.3, 97.6 and 63.7, respectively. The corresponding EPS from 2023 to 2025 is about 0.23 yuan, 0.45 yuan and 0.74 yuan respectively, and the corresponding PE valuation is 351 times, 178 times and 109 times respectively. Considering that the company is a leading enterprise in the field of global gene sequencers, there is much room for improvement in overseas market share in the future, and the "buy" rating is maintained.

Risk Alert

the risk of new product development and promotion falling short of expectations;

Market competition increases risk.

the securities star data center calculated according to the research report data released in the past three years that the research team of he juying of citic construction investment securities has conducted in-depth research on the stock. the average forecast accuracy in the past three years is as high as 97.56. its forecast net profit for 2023 is profit 41.81 million, and the forecast PE converted according to the current price is 803.28.

The latest profit forecast is as follows:

The stock has been rated by 15 institutions in the last 90 days, with 9 buy ratings and 6 overweight ratings; the average institutional target price in the past 90 days is 107.99.

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