Main points of investment

Performance: steady growth of Q3 income

2022Q1-Q3: the company achieved operating income of 1.371 billion yuan, an increase of 20.59% over the same period last year; net profit of 455 million yuan, up 16.73% over the same period last year; and net profit of 436 million yuan, an increase of 13.44% over the same period last year.

2022Q3: the company achieved operating income of 575 million yuan, an increase of 11.97% over the same period last year, a net profit of 168 million yuan, an increase of 1.7% over the same period last year, and a net profit of 167 million yuan, an increase of 0.97% over the same period last year.

Growth: product declaration & registration acceleration

By combing through the company announcement, eight varieties of Q3 voriconazole for injection, pantoprazole sodium for injection, daptomycin for injection, sodium nitroprusside sodium chloride injection, mesobamol injection, azithromycin for injection, ganciclovir for injection and oxcarbazepine tablets have been licensed abroad. Terlivasopressin injection, pantoprazole sodium for injection and esomeprazole sodium for injection have obtained domestic drug registration approval. According to the company's report, "at present, 63 domestic production approvals and 79 foreign production and listing licenses have been obtained for products in the field of generic drug research and development; 70 products are under review at home and abroad; it is expected that more than 80 products will be accepted for listing this year." We are optimistic about the company's diversification & international preparation variety echelon to open room for growth.

Profitability: increased R & D investment, convertible bond interest affects financial expenses 2022Q3 gross profit margin is 78.22%, year-on-year increase of 1.17pctbot 2022Q3 R & D expense rate 21.87%, year-on-year increase of 3.47pct, mainly due to the increase of R & D investment, it is recommended to pay attention to the company's breakthrough in the field of innovation; sales expense rate 12.07%, down 2.46pct Management expense rate 6.1%, year-on-year decline 1.04pct, financial expense rate 4.45%, year-on-year increase in 1.55ct, mainly due to the impact of interest on convertible bonds (according to the company announcement, 2022Q3 interest expense is about 25.32 million yuan, 2021Q3 interest expense is about-6.88 million yuan); under the influence of the above factors, the company's 2022Q3 net interest rate decreased 2.95pct compared with the same period last year. Taking into account the changes in the company's gross profit margin, R & D investment and the construction of sales channels, we expect the net profit margin to increase slightly in 2022-2024, basically maintained.

Profit forecast and valuation

We are optimistic that the company will make breakthroughs in the field of innovation from difficult and improved dosage forms, and continue to be optimistic about the acceleration of the company's preparation export and the increase of domestic preparation market share. We expect EPS to be 1.32,1.71,2.17 yuan per share respectively from 2022 to 2024, and the closing price on October 24, 2022 corresponds to 19 times PE in 2022. We are optimistic that the company's new workshop capacity continues to release, ANDA registration and declaration capacity continues to improve, the valuation performance-to-price ratio is obvious, to maintain the "overweight" rating.

Risk hint

Production safety accident and quality risk; core preparation variety flow standard or sales less than expected risk; exchange rate fluctuation risk; order delivery volatility risk; medical regulatory policy change risk.