Main points of investment:

The revenue is more resilient under the epidemic. The company's revenue in the first half of 2022 was 220 million yuan, an increase of 17.8% over the same period last year. The net profit returned to its mother was-19.29 million yuan, and the operating cash flow was 22.88 million yuan, an increase of 29.3% over the same period last year. In the first half of the year, sales expenses, management expenses and R & D expenses accounted for 48.5%, 18.7% and 35.2% of revenue respectively.

Due to the impact of the epidemic and competitive products, revenue in the first half of the year was lower than expected by management, and cedarbamine and ciglitar sodium are expected to maintain the expected growth throughout the year. Sales of cedarben accounted for 90 per cent of revenue in the first half of the year, up 22 per cent from a year earlier. Cedaben peripheral T-cell lymphoma sales continued to maintain a high growth rate of 33% year-on-year, in line with expectations, but cedar benamine breast cancer sales fell in the first half of the year due to the triage effect of CDK inhibitors entering the national health insurance. Management judged that the shunt effect was short-term. Cedarben, as an effective mechanism for relapse and drug resistance, is expected to gradually pick up in the second half of the year.

At the same time, due to the serious impact of the epidemic in many places in the country in the first half of the year, the academic promotion of new drugs just listed could not be carried out in many regions and for many periods of time, which seriously restricted the use of ciglitazide sodium by patients.

With the gradual stabilization of the epidemic in the second half of the year and the demand of breast cancer patients with advanced CDK treatment for the combination of cedarben, sales of cedarben and ciglitar sodium are expected to maintain the expected growth throughout the year.

Research and development has been fruitful, cedarben and cigleta sodium two major indications to complete the III phase of the clinical.

The critical III phase clinical trial of cedarbamine diffuse large B-cell lymphoma (DLBCL) was completed in July 2022. This is the first III phase registered clinical trial with MYC/BCL2 double expression DLBCL (DEL) as an indication in the world. It is expected to enter the trial results analysis phase in 2023Q1.

All subjects were enrolled in the critical III phase of ciglitate sodium combined with metformin in the treatment of type 2 diabetes and are expected to enter the analysis phase of the results of the trial within 2023Q1.

Two projects to declare overseas clinical trials are nearing completion of preclinical work. CS23546, a small molecule PD-L1 dimer antagonist, has completed most of its preclinical research work and plans to submit a declaration for communication (preIND) in November 2022; a small molecule Tyk2 selective inhibitor, CS32582, is scheduled to promote preclinical evaluation and is scheduled to apply for communication (preIND) in June 2023.

Chengdu Macromolecular Biotechnology Co., Ltd. has completed two rounds of funding increase, focusing on new therapeutic methods and technologies, including macromolecules represented by antibodies, nucleic acid drugs, cell therapy and so on.

Profit forecast and valuation. A number of clinical trials are being carried out around the world, and we believe that the revenue of the company in 2022-24 will continue to grow at a high speed with the product listing, and there is some uncertainty at the profit end affected by R & D investment. We estimate that the company's revenue in 2022-24 will be 610 million yuan, 960 million yuan and 1.61 billion yuan respectively, an increase of 41.0%, 57.3% and 68.6% respectively over the same period last year. The net profit of 2022-24 is 18.73 million yuan, 100 million yuan and 250 million yuan respectively.

We assume that the sustainable growth rate is 1.25% less than 1.75% and the WACC value is 7.97% to 8.47%, then the reasonable market value range of the company's DCF is 1344 to 15.72 billion yuan, corresponding to the reasonable value range of 3271 to 38.26 yuan per share, maintaining the "better than the market" rating.

Risk hint: the progress of R & D is not as expected, and the progress of commercialization is not as expected.