Event: the company released the mid-2022 report that the company realized operating income of 3.312 billion yuan (- 5%) in the first half of 2022, realized net profit of 352 million yuan (- 20%), and deducted 311 million yuan (- 27%) of non-return net profit. Among them, Q2 achieved revenue of 1.579 billion yuan (- 15%) in a single quarter, net profit of 114 million yuan (- 53%) and non-return net profit of 108 million yuan (- 54%).

Comments:

1. The switch between the new and old standards of formula granules & the impact of the epidemic leads to short-term pressure on 22H1 performance. From the revenue side, 2022H1 is affected by the epidemic and the switching of national standards of formula granules. The company's revenue decreased by 5% compared with the same period last year, achieving a revenue of 3.312 billion. Of this total, the formula granule and prepared slices business generated 1.629 billion of revenue, down about 10 per cent from the same period last year. On the one hand, at present, the switching of the new national standard of formula granules needs to be put on record at the place of production and sales, thus affecting the overall switching rhythm; on the other hand, the epidemic situation in the first half of the year has an impact on the number of outpatients in the hospital; in addition, the number of new national standard varieties of formula granules is insufficient, and out of stock and other factors make it difficult to form a clinical prescription, thus affecting terminal sales. From the profit end, the deduction of non-return net profit is 311 million yuan (yoy-27%), and the return net profit is 352 million yuan (yoy-20%). The decline in net profit deducted from non-homing is greater than that at the revenue end mainly because: ① 's comprehensive gross profit margin fell 2.02 percentage points year-on-year (to 53.46%), and the core influencing factors were still formula granule and prepared slices business. 22H1 formula granule and prepared slices business gross profit margin fell 3.31% year-on-year (down to 65.1%), mainly because the implementation of national standards increased the cost per unit formula granule production. During the period of ②, the expense rate increased by 2.35% year-on-year (to 41.67%), of which the sales rate increased by 0.64% (31.37%) and the management expense rate increased by 1.63% (9.52%).

2, the steady growth of finished drugs, research and development to promote the product pipeline to continue to enrich in the finished drug plate, 22H1 Xuebijing continues to maintain steady growth, at the same time Naqu heparin calcium injection, injection thymus method in the first half of the new production approval, in addition, the company's 5 class 1.1 chemical drugs have made new progress, of which KB (sepsis) has carried out IIb clinical research in more than 40 hospitals across the country, and the clinical trial is progressing smoothly. In the device sector, 22H1 medical devices generated 420 million yuan in revenue, down 25.77% from the same period last year, mainly because of the large base of foreign medical device sales in the same period last year. In terms of profitability, the gross profit margin of the equipment sector increased by 1.70% year-on-year (41.07%), mainly because the company continued to improve the efficiency of the supply chain and promote technology cost reduction. In addition, in the first half of the year, the company completed 10 product certifications (4 domestic and 6 overseas), 8 new products on the market and 1 trial production at the same time. In the pharmaceutical machinery wisdom supply chain, the company achieved 398 million yuan (yoy+54%) in revenue in the first half of the year, with a gross profit margin of 22.21%, down 4.64% from the same period last year. The pharmaceutical equipment wisdom supply chain is mainly operated by Zhengkang Medical Technology, which focuses on providing customers with digital and integrated solutions that meet the requirements of intelligent hospital construction. 22H1 Zhejiang people's Hospital SPD project and Shenzhen Sami Hospital SPD project have been successfully implemented.

Profit forecast: we estimate that the company's revenue from 2022 to 2024 will be 8.528 billion yuan, 11.47 billion yuan and 13.868 billion yuan respectively, an increase of 11%, 35% and 21% respectively over the same period last year.

It is estimated that the net profit from 2022 to 2024 will be 766 million yuan, 1.258 billion yuan and 1.574 billion yuan, an increase of 11%, 64% and 25% respectively over the same period last year, and the share price PE before the corresponding period is 22 times, 13 times and 11 times respectively. Maintain the "highly recommended" rating.

Risk tips: formula particles market expansion risk, formula particles price increase is blocked, formula particles collection risk, market competition aggravates the risk, product sales do not meet expectations.