Investment logic: 1) the company has established a channel platform and a large-scale manufacturing platform with 3,000 expected customers around the world, with obvious competitive advantages in sales and cost reduction; 2) the concentration of the veterinary drug industry has increased, and the ban has promoted the demand for therapeutic antibiotics. Florfenicol, enrofloxacin and doxycycline have revenue of more than 100 million, the product is rich, and the quality is recognized at home and abroad. 3) the compound growth rate of the pharmaceutical market in 2015-21 is about 5.4%. The company promotes the integration of the intermediate-API-preparation industry chain and is one of the largest suppliers of macrolides and quinolones in the world.

"one system, two platforms" helps the company to form a comprehensive advantage. One system refers to effective management and innovation system. The two platforms are advanced and complete large-scale manufacturing platform and extensive and effective global market channel platform. In terms of production and manufacturing, the company has mastered the typical chemical reaction and solvent technology in production, and saved costs through integrated research layout to form the advantage of intensive manufacturing. In terms of channel platform, the company serves customers at home and abroad, integrates domestic and foreign trade, covers sales networks on six continents, sells products to 115 countries and regions, and has established trade and cooperative relations with more than 3000 customers around the world. The company has established API sales channels in India, the Netherlands, South Korea, Pakistan and Spain, and semi-preparation products are also sold to Southeast Asia and Africa. The top five customers of the company in 2020 include Zhejiang Benli, Insud Group, Abbott Group, Shandong Yakang Pharmaceutical Industry and Hetero Group, with a total sales of 360 million yuan, accounting for 8.6% of the company's direct sales revenue of 2.93 billion yuan in 2021, accounting for 65%, and indirect sales accounted for about 35%.

The concentration of veterinary chemical medicine industry has increased, the company's market share has further increased, and the quality of products has been widely recognized at home and abroad. The new version of the "Veterinary Drug GMP acceptance Evaluation Standard" will be implemented in June 2020 to raise the entry threshold for veterinary drug production and avoid low-level repeated construction and overcapacity. It is stipulated that veterinary drug manufacturing enterprises must pass the new version of the audit standard before June 1, 2022 before they can continue production and operation, and the backward production capacity will be eliminated by the market. The company develops animal protection API and preparation business with rich product matrix and strong comprehensive competitive advantage. the leading products florfenicol and enrofloxacin contribute more than 100 million in revenue and have a high market share. the main products also include doxycycline, cypromazine, dikezuril and mabofloxacin, which are widely used in the field of animal protection. At present, nearly four percent of the company's animal protection plate has become an export business. according to customs data and company prospectus data, in 2019, enrofloxacin API company exported 891 tons, accounting for 59.8% of the country's total exports in 2019. Guobang pharmaceutical florfenicol API exports have become the first place in the market, accounting for 21.9% of the national total. In the future, the company will have an annual production base of 5750 tons of animal protection raw materials, an annual production base of 6000 tons of animal protection preparations, an annual production line of 3000 tons of veterinary drug solid preparations, and a production line of 3000 tons of feed additives and mixed feed additives. bring about performance increments.

With the rapid growth of the pharmaceutical market, the company firmly grasp the advantages of product quality and promote the integration of the industrial chain. According to the report on in-depth Analysis of the current situation and Development Prospect of China's Pharmaceutical Industry (2022-2029), the global pharmaceutical market reached US $1.3934 trillion in 2021, with a compound growth rate of about 3.9% from 2016 to 2021.

The growth rate of China's pharmaceutical market is higher than the global average growth rate. According to Frost&Sullivan statistics, the size of China's pharmaceutical market has increased from 1.2207 trillion yuan in 2015 to 1.7292 trillion yuan in 2021, with a compound growth rate of 5.4%. The company is one of the world's largest suppliers of macrolides and quinolones, including antibiotics, cardiovascular, respiratory, urinary and antineoplastic drugs. The main products azithromycin, clarithromycin, roxithromycin, ciprofloxacin hydrochloride are sold more than 100 million yuan of single series. At the same time, the company carries out the production of key pharmaceutical intermediates, focusing on reducing agent series products, advanced amine series products, etc., to create an integrated layout of intermediate-API-preparation industry chain. In the future, the company's cephalosporin products new / technical renovation project, characteristic API and industry chain improvement project, key intermediate project, pharmaceutical preparation project will be completed and put into production one after another, and revenue will further increase.

Profit forecast and investment advice. It is estimated that the EPS in 2022-2024 will be 1.8,2.24,2.79 yuan respectively, and the corresponding dynamic PE in 22-24 will be 14X/11X/9X respectively. With reference to the industry average PE19 times in 2023, taking into account the company's future production capacity and increase in market share, the company will be given 20 times PE in 2023, with a "buy" rating for the first time and a target price of 44.80 yuan.

Risk tips: the company's capacity expansion is not as expected, product sales are not as expected, and so on.