Key takeaway

In 4Q25 and 1Q26, the company's net profit attributable to shareholders of the parent company grew 17.09% YoY and 30.93% YoY respectively, as earnings growth continued to accelerate, with the 1Q26 growth rate reaching a near five-year high. Organically, the company's five major business segments worked in synergy, and the "123" strategy continued to advance, maintaining strong growth momentum. Inorganically, the integration of acquired overseas targets progressed smoothly. In the first quarter, the company's overseas business revenue grew over 70%, with its revenue share exceeding 10%, as the company's internationalization process accelerated across the board. In April 2026, the company launched its fifth employee stock ownership plan (draft), aimed at further improving the benefit-sharing mechanism, deeply aligning the interests of the company, shareholders, and employees, strengthening management and core staff identification with the company's long-term value and future development, and demonstrating firm confidence in the company's value and future development.

Event

The company released its 2025 annual report, reporting full-year revenue of RMB6.621bn, up 8.82% YoY, and net profit attributable to shareholders of the parent company of RMB1.016bn, up 10.35% YoY. In the fourth quarter, revenue reached RMB1.919bn, up 13.68% YoY, with net profit attributable to shareholders of the parent company of RMB204mn, up 17.09% YoY.

The company released its 1Q26 report. Revenue came in at RMB1.495bn, up 16.17% YoY, while net profit attributable to shareholders of the parent company was RMB178mn, up 30.93% YoY.

Quick Take

Quarterly earnings growth continues to accelerate, Q1 results beat our expectations.

In 2025, the company's revenue and net profit attributable to shareholders of the parent company grew 8.82% and 10.35% YoY respectively, maintaining steady growth. By segment, life sciences, industrial testing, consumer product testing, trade assurance, and pharmaceutical and medical services reported revenue of RMB2.910bn, RMB1.376bn, RMB1.127bn, RMB880mn, and RMB327mn respectively, representing YoY growth of 2.45%, 14.29%, 14.10%, 15.19%, and 13.87%, with gross margins of 50.08%, 42.65%, 42.31%, 70.75%, and 22.90%, changing by - 0.34pct, -2.60pcts, -1.22pcts, -0.46pct, and +2.47pcts YoY respectively. Except for the life sciences segment, which saw single-digit growth due to the high base effect from the Third National Soil Survey, all other segments achieved double-digit or higher growth, delivering an excellent performance.

In 2025, the company achieved a gross margin of 48.62%, down 0.85 pct YoY; the expense ratio during the period was 31.83%, down 0.12 pct YoY; and the net profit margin attributable to shareholders of the parent company was 15.35%, up 0.21 pct YoY, reflecting steady improvement in profitability.

On a quarterly basis, the YoY growth rates of net profit attributable to shareholders of the parent company in 4Q25 and 1Q26 were 17.09% and 30.93%, respectively, with performance growth continuing to accelerate. The growth rate in 1Q26 reached a new high in nearly five years. The integration of the company's acquired overseas targets progressed smoothly. In the first quarter, the company's overseas business revenue grew by over 70%, and its revenue share exceeded 10%, marking a comprehensive acceleration in the company's internationalization process. In addition, the company achieved positive operating cash flow in the first quarter for the first time in nearly a decade, demonstrating solid operating quality. In 1Q26, the company's asset and credit impairment losses decreased by over RMB30mn YoY, which also made a positive contribution to profit growth.

Five major segments driving synergistic growth, with continuous advancement in strategic upgrading and international business expansion.

Life Sciences Segment: In the food and agricultural testing sector, the company continues to advance its "123" strategy, promoting full-chain service upgrades centered on a key client approach. 2025 marked the first year of internationalization for the company's Food, Agriculture and Health Products Business Unit, accelerating its overseas presence and injecting long-term growth momentum. In the environmental testing sector, while consolidating traditional advantages, the company deepened lean management and accelerated its deployment in emerging areas such as new pollutants and biodiversity surveys, achieving a smooth transition against the high-base backdrop of the Third National Soil Survey.

Consumer Products Testing Segment: In the new energy vehicle sector, the company continued to increase investment, achieving relatively rapid revenue growth, with profits expected to improve as production capacity is gradually released. In the aerospace sector, investment in aviation testing and the low-altitude economy increased, with deployment advancing steadily. In the chip and semiconductor testing sector, FA/MA capacity was gradually released, achieving notable results in revenue growth, loss reduction, and customer recognition.

Trade Assurance Segment: This segment continues to serve as a profit stabilizer, providing solid support forthe company's overall development. Within this segment, the electronic material chemical and reliability testing business has been smoothly integrated following the acquisition of Microtek. The audit and inspection business significantly expanded its global supply chain audit capabilities through the acquisition of Openview.

Industrial Testing Segment: In the maritime sector, the company achieved a global presence through the acquisition of NAIAS, with integration yielding positive results, and continued to innovate by leveraging green transition opportunities in the industry. The construction and industrial sectors gradually achieved strategic transformation, addressing HSEQ shortcomings through the acquisition of South Africa's Safety SA and focusing on advantageous tracks to cultivate new growth points. The metrology and calibration business focused on the advanced manufacturing sector, maintaining steady growth. The sustainable development business maintained its industry-leading position and accelerated its deployment in the EU market through the acquisition of Greece's Emicert.

Pharmaceutical and Medical Services Segment: Leveraging the Group's ample cash flow to continuously increase strategic investment. In the pharmaceutical sector, drug testing capacity is gradually being released, CRO business contract signing growth is accelerating, and resource bottlenecks are being addressed through the acquisition of monkey farms. In the medical device sector, investment continues to increase to build momentum for future development. The medical services sector has completed strategic transformation and upgrade, focusing on high-value tracks, with gross margin continuously optimizing and improving.

Launch of employee stock ownership plan demonstrates firm confidence in future development

In April 2026, the company launched the fifth phase of its employee stock ownership plan (draft), aimed at further improving the benefit-sharing mechanism, deeply aligning the interests of the company, shareholders, and employees, and strengthening the sense of identification among management and core personnel with the company's long-term value and future development. The total funds to be raised under this employee stock ownership plan are capped at RMB73.45mn, corresponding to a maximum of 5 million shares at RMB14.69 per share, with total participants not exceeding 70 people. The employee stock ownership plan helps effectively mobilize the enthusiasm of managers and employees, strengthen organizational cohesion and sense of responsibility, and enhance the company's ability to attract and retain outstanding management talent and business backbones, thereby solidifying the talent foundation for the company's long-term, sustained, and healthy development.

Investment recommendation: We estimate the company's operating revenue for 2026-2028 will be RMB7.620bn, RMB8.542bn, and RMB9.449bn, respectively, representing YoY growth of 15.1%, 12.1%, and 10.6%. Net profit attributable to shareholders of the parent company is estimated at RMB1.173bn, RMB1.340bn, and RMB1.512bn, respectively, representing YoY growth of 15.4%, 14.2%, and 12.9%. The corresponding P/E multiples are 21.3x, 18.6x, and 16.5x. We maintain our "Buy" rating.

Risks: ① Risk of Credibility and Brand Damage: The inspection, testing, and certification business is highly dependent on credibility, independence, and result accuracy. Any quality flaws, compliance failures, or impartiality disputes may undermine customer trust, affecting business expansion and profitability, and in severe cases, even impacting the continued validity of relevant qualifications. ② Risk of Market and Policy Changes: The testing industry is significantly influenced by policy direction and market access rules. Adverse changes in the pace of industry liberalization, regulatory requirements, or related provisions may disrupt the company'soperating environment and business development. ③ M&A and integration risks: The company enters new fields through M&A. If target screening, transaction decisions, or post-investment integration fall short of expectations, investment returns may be affected. ④ Risk of laboratory investment falling short of expectations: Newly built laboratories have a cycle from construction to reaching full capacity. If qualification acquisition, capacity release, or operational efficiency falls short of expectations, it may create phased pressure on the company's profits.