Medical beauty and medicine blossom more, and the revenue and net profit are released in an all-round way. The company 2021 H1 achieved a total revenue of 1.907 billion yuan (YOY+80.9%) and a net profit of 611 million yuan (YOY+307.6%). In the first half of the year, the overall gross profit increased by 2.4pcts to 76.9%, the rate of sales expenses increased by 0.74pcts to 13.68%, the rate of management expenses decreased by 5.51pcts to 14.61%, the rate of R & D expenses decreased by 11.04pcts to 17.49%, and the net interest rate increased by 15.89pcts to 32.06%.

Letibao makes rapid contribution to the performance and continues to create a matrix of medical and aesthetic products. In the first half of the year, the income of medical and beauty products was 258 million yuan (YOY+771.3%), accounting for 13.5% of the total income, the operating profit was 200 million yuan, and the net profit was about 140 million yuan. Botulinum toxin product Letibao sold more than 200000 bottles after it was put on the market in February, and it is widely recognized for its high performance-to-price ratio. by the end of July, there were more than 40 agents and more than 1800 agencies, among which the head 500 institutions had covered nearly 400. the goal is to cover 3000 institutions by the end of the year. In terms of channels, both online and offline, side B carries out doctor / agent training and promotes real-time communication through Mini Program Layan Society, and the C side ploughs a variety of new media platforms to assist institutions to drain and improve brand volume. In terms of products, we continue to create light medical beauty series and introduce high-end equipment, and in the first half of the year, we introduced the absorbable suture and tension-free urethral suspension belt of Korea Oriental Medical Association in China (both of which have been approved and can be put on the market quickly), and won the exclusive agency of Genesis Biosystems fat collection system LipiVage in China and South Korea in the first half of the year. In addition, the company continues to strengthen self-research and transformation, and set up a Medical and Beauty products Research Institute in Southern California to tackle new overseas technologies and produce them at home, and work together to create high-quality product pipelines. At present, the company is independently studying more than 10 products, including child needles, young girl needles, collagen and lipolysis, etc., and the agent / self-research products are expected to be approved and put on the market in the next three to four years, and co-build a product matrix with Letibao to help the medical and beauty business continue to develop.

The recovery of pharmaceutical business exceeded expectations, and profit margins increased significantly. In the first half of 21, the total income of the pharmaceutical sector of the company was 1.65 billion yuan, + 57% compared with the same period last year. Calculated on the basis of the total profit minus the net profit of Mimi, the pharmaceutical sector contributed profit of about 411 million yuan, and the net interest rate reached 25%, which was significantly higher than the net interest rate of 19% in 20 years. The variety of non-key monitoring catalogue in medicine is 1.19 billion yuan, which is + 122% compared with the same period last year, accounting for 78.9% of the generic medicine plate. In addition, the income of key monitoring catalogs was 320 million yuan, down 12% from the previous year; at present, the income of the pharmaceutical business mainly contributed to generic drugs, and in the first half of the year, key products such as nicotinamide for injection, HuiNeng, Shucheng and other products achieved rapid growth at the income end, driving the overall growth rate. The company expects Klinao (cinepazide maleate injection) to return to health insurance and achieve a rebound in sales; four products with double-chamber bags of non-PVC powder will be on the market this year. The follow-up generics business will continue to provide cash flow for the company.

The research and development of innovative drugs and biological drugs are progressing smoothly, and API and CDMO are interesting. The company's innovative drug platform Xuanzhu Bio Anaprazole Sodium has been in the pre-NDA stage, Pirosini has entered the clinical III phase, and benapenem is ready to enter the clinical III phase. Huisheng biology 1.1 new drugs Garglegin, biological analogs aspartate insulin, Mendong 30, Mendong 50 are preparing for NDA declaration, Degu Islet is undergoing III phase clinical, Degu Mendong double insulin has obtained clinical approval, Lilaru peptide III phase development plan communication, will soon enter the clinical III phase. The company expects the production capacity of the second phase of Huisheng to reach full capacity in 24 years, with a production capacity of 150 million units, supporting an output value of 15 billion yuan. The revenue of API and CDMO business is 140 million yuan, with more than 100 overseas customers and nearly 50 Chinese customers, which is expected to become a new focus of the company.

Profit forecast: according to the performance of the semi-annual report, we maintain the forecast of the company's 2021-2023 income of 54.83 billion yuan and net profit of 875 million / 1.313 billion / 1.945 billion yuan. The company currently has a market capitalization of 21.8 billion Hong Kong dollars, corresponding to 18.1 billion yuan, corresponding to 21 times PE in 2021, maintaining a "buy" rating.

Risk tips: botulinum toxin product sales are not as expected; medical and beauty follow-up product research and development is not as expected; drug research and development is not as expected; drug revenue growth is slowing; market competition aggravates the risk.