2022Q3 revenue increased by 69.39% year-on-year, and net profit increased by 381.33% compared with the same period last year. In the first three quarters of 2022, the company realized operating income of 706 million yuan, year-on-year + 71.26%; net profit of 88 million yuan, + 538.68%; deduction of non-net profit of 83 million yuan, + 1176.44%; and basic earnings per share of 0.15 yuan, compared with 0.02 yuan in the same period last year. From a quarterly point of view, Q3 revenue reached 230 million yuan, + 69.39% compared with the same period last year; net profit was 30 million yuan, + 381.33% year-on-year; non-net profit was 28 million yuan, + 479.52%; and basic earnings per share was 0.05yuan, compared with 0.01yuan in the same period last year. During the reporting period, through accurate research and evaluation of the raw materials market and supplier optimization, the company enhanced the purchasing cost control ability of raw materials and auxiliary materials, strictly controlled procurement costs, carried out internal production factor optimization and production organization innovation, further improved production efficiency and support capacity, and better controlled various costs; coupled with the positive market demand, the company effectively grasped the market end efficiency opportunities, increased market expansion efforts, and optimized customer structure. At the same time, the subsidiary Yiqing biological consolidated table, sales revenue and profits increased accordingly.

Profitability increased significantly, gross profit margin year-on-year + 13.24pct, net margin year-on-year + 9.77pct. The company's gross profit margin for the first three quarters was 25.78%, year-on-year + 13.24pct; on the expense side, the expense rate during the first three quarters was 9.91%, year-on-year-0.94pct, in which the sales expense rate / management expense rate / R & D expense rate / financial expense rate were 1.89%, 5.31%, 2.42%, 0.29%, respectively, + 0.17pct/+0.28pct/+0.76pct/-0.27pct. The increase in sales expenses and management expenses is mainly due to the merger of the subsidiary Yiqing Bio in the current period. The increase in R & D expenditure is mainly due to the higher R & D investment than that in the same period last year and the corresponding increase in R & D investment in Yiqing Biological Research and Development, the merged subsidiary of the current period. In the first three quarters, the company's net interest rate was 13.09%, which was + 9.77pct compared with the same period last year.

Substitute plasma gelatin to achieve targeted sales, the future will cover more downstream customers. According to the company announcement, the second part of the company's Pharmacopoeia gelatin (substitute plasma gelatin) has passed the related review of some downstream customers, has achieved targeted sales, and the company will further do a good job in related work to cover more downstream users and expand more high-end gelatin market.

Collagen terminal business multi-point layout strategy gradually landed, focusing on promoting the star single live business, and further strengthen the terminal operation work. During the reporting period, the company set up Guoen Jingtao (Zhejiang) Digital Technology Co., Ltd., Dongbao Yuansu (Qingdao) Biotechnology Co., Ltd., to promote the landing of the strategy of multi-point layout of terminal business, and the terminal series of products are also gradually enriched. New products including bird's nest collagen peptide liquid drink, passion fruit enzyme powder, collagen brightening mask and so on have been launched one after another. At present, the product category has covered health food, nutritional protein, nourishing nutrition, intestinal management, weight management, beauty and skin care, leisure snacks and so on, which can meet the diversified health needs of people of different ages. At the same time, the company relies on a number of operating platforms, actively carry out e-commerce live broadcast business, strive to promote the creation of star items, and further strengthen the terminal operation work.

Investment suggestion: the company focuses on the whole industry chain of natural collagen, forming a production, R & D, sales and service system of high-quality bone grain base-gelatin-collagen-nutritional health products / medicinal materials. formed a good technical reserve, brand effect and customer reputation. As Guoen shares become the controlling shareholder, the company further speeds up the strategic landing, continuously improves the efficiency of operation and management, actively strengthens technological innovation, and develops extended products around gelatin and collagen. There is a layout in "medicine, health, food and beauty". With the rapid development of the collagen industry and the continuous introduction of new products, the company's revenue is expected to achieve sustained growth. We predict that the EPS of the company from 2022 to 2024 will be 0.19,0.22,0.26 respectively, and the corresponding PE will be 42X, 35X and 30X respectively, maintaining the investment rating of "increasing holdings".

Risk hints: the risk of repeated epidemic situation, the risk aggravated by market competition, the risk of purchasing major raw materials, the risk of mismatch between input and return in the process of market expansion of retail series products, policy risk, the risk of raising funds for investment projects that do not meet expectations.