Key points of investment

Incident: Recently, Ganli Pharmaceutical released its 2022 mid-year report. In the first half of 2022, the company achieved operating income of 835 million yuan, a year-on-year decrease of 43.42%; realized net profit of -198 million yuan, a year-on-year decrease of 153.01%; and achieved net profit of -209 million yuan, a year-on-year decrease of 161.45%.

Profit prediction and valuation: As the first Chinese company to successfully develop, produce and industrialize recombinant insulin analogs in China, the company has long been in a leading position in the domestic third-generation insulin industry. With the company's active layout in overseas markets in recent years, its competitiveness in the international market has continued to improve, which is expected to usher in new performance growth points. At the same time, competition in the domestic diabetes medication pattern is intensifying, and bioanalogues face the risk of being collected and reduced in price. We adjusted our profit forecast for the company. It is estimated that the company's EPS for 2022-2024 will be 0.77, 0.97, and 1.31 yuan respectively, and that the corresponding PE for the stock price on September 1, 2022 will be 47.4, 37.7, and 27.9 times respectively, maintaining the “prudent increase in holdings” rating.

Risk warning: insulin sales fall short of expectations; development of new products is progressing slower than expected; overseas market development falls short of expectations; risks related to centralized procurement, risk of public health and international relations incidents.