Stock price review: centralized procurement VS epidemic, differentiated growth and excess earnings. Two peaks in January 2022 and March-April 2022. IVD, low-value consumables, etc. performed prominently, mainly driven by the epidemic; from the perspective of valuation, since May The valuation of medical equipment and high-value consumables has rebounded. We believe that it is mainly due to the recovery of expectations after the epidemic and the improvement of the centralized procurement sentiment due to the increased volume of joints.

Fundamental review: segment differentiation under the epidemic, innovation accelerated under centralized procurement.

(1) From the perspective of growth, the revenue growth of the IVD segment in 2022 is a record high; the growth rate of revenue and profit of high-value consumables has declined significantly, mainly due to the decline in production, supply and surgery volume due to the closure and control of the epidemic;

(2) From the perspective of profitability, the net profit margin of IVD has increased significantly, the net profit margin of high-value consumables has remained at a relatively high level, and the net profit margin of low-value consumables has dropped significantly, mainly due to changes in the supply and demand structure. The rate of device research and development expenses has increased rapidly, and the product iteration has accelerated under the influence of centralized procurement and domestic innovation incentive policies;

(3) From the perspective of operational capabilities, the IVD inventory turnover rate and fixed asset turnover rate have increased significantly, mainly due to demand; while the inventory turnover rate of high-value consumables, medical equipment, fixed asset turnover rate, and accounts receivable turnover rate have increased significantly. The decline, we believe, is mainly due to the impact of demand under the epidemic.

Investment Suggestions 1. In the short term, a high-value consumables and medical equipment company with high income growth brought about by the rebound of normalized surgeries due to the epidemic in the second half of the year; in the long run, an innovative device platform company with high technical barriers, a good competition pattern, and continuous innovation and iteration. It is recommended to pay attention to Mindray Medical, Minimally Invasive Medical, Yirui Technology, Nanwei Medical, Minimally Invasive Robot, Cardiovascular Medical, Minimally Invasive Electrophysiology, etc.;

2. Relevant reagents and third-party testing opportunities brought about by the periodicity of the epidemic and the normalization of domestic testing. It is recommended to pay attention to Yahuilong, Shengxiang Bio, etc.

Risk warning: The risk of product development and commercialization being less than expected; the risk of the continuation of the new crown epidemic; the risk of industry policy changes; the risk of intensified competition in the industry; the risk of exchange rate fluctuations.