The company released the third quarter report for 2024: in the first three quarters of 2024, the operating income was 1.869 billion yuan, a year-on-year decrease of 15.19%, the net profit attributable to the parent company was -463 million yuan, and the non-net profit was -497 million yuan. In the third quarter of 2024, the company achieved operating income of 660 million yuan, a year-on-year decrease of 13.22%, net profit attributable to the parent company of -165 million yuan, and non-net profit of -173 million yuan.

Under the influence of multiple factors, the performance is under pressure in the short term. On the revenue side, affected by the macro environment, geopolitics, market competition and other factors, the company's operating income declined in the short term. The gross profit margin fluctuated in a range due to factors such as product mix, with a gross margin of 61.47% in the first three quarters of 2024 (compared to +1.72 pct in the same period last year) and a gross profit margin of 58.38% in the third quarter of 2024 (compared to -4.66 pct in the same period last year). In the first three quarters of 2024, the company's sales, management, and R&D expenses were 6.32/4.00/554 million yuan, an increase of 12.78%/13.58%/-13.80% year-on-year, respectively; Among them, the company's sales, management and R&D expenses in the third quarter were 2.24/1.54/182 million yuan, an increase of 8.95%, 23.10% and -13.53% year-on-year respectively. The increase in expenses and the year-on-year decrease in revenue led to a significant increase in the expense ratio during the period, and the exchange rate fluctuations of the US dollar and the euro also led to a year-on-year increase in foreign exchange losses from foreign currency monetary items held during the reporting period, so profits remained under pressure in the short term.

The company continues to develop new technologies and new products, and its international influence continues to increase.

New technologies and new products: For example, in the first half of 2024, the company launched a new generation of sequencing reagent StandardMPS 2.0, marking that high-throughput gene sequencing technology has entered the Q40 quality standard era; Using its unique CoolMPS sequencing technology, the company has successfully developed SE600, the longest single-ended read reagent for high-throughput gene sequencing to date.

Expanding strategic partnerships and increasing international influence: For example, in November 2024, MGI announced a commercial partnership with HCA (International Alliance for Human Cell Atlas) to facilitate in-depth research on global human cell atlases. In October 2024, it reached strategic cooperation with companies such as Burning Rock Dx, Belgian precision medicine company OncoDNA, Decode DNA, and in September, it reached strategic cooperation with AdvancedDx Biological Laboratories USA, a wholly-owned subsidiary of ABLD, Haorui Gene, and Dasa, the largest medical diagnostic company in Latin America, to promote the high-quality development of tumor precision medicine, microbial sequencing, agricultural gene editing and other fields.

Profit Forecast and Investment Advice: We are optimistic that the company, as a leading domestic gene sequencer supplier, will continue to improve its global competitiveness in the uncertain international political environment, and maintain a "highly recommended" rating for its overseas business. Taking into account the impact of macro environment, geopolitics, market competition, foreign exchange and other factors, as well as the performance of the first three quarters, it is expected that the net profit attributable to the parent company in 2024-2026 will be -3.13/-1.39/54 million yuan respectively.

Risk warning: geopolitical risk, intensified competition risk, technology iteration risk.