Incidents: In 2022, the company achieved revenue of 407 million yuan (+15.95%); net profit attributed to the mother was 182 million yuan (+3.36%); after deducting non-net profit of 173 million yuan (+10.34%).

Quarterly financial indicators and on-hand orders indicate that the slowdown in performance growth in '22 was due to the impact of the Q4 external environment. Q1-4 achieved revenue of 101 million (+44.23%), 114 million (+32.75%), 106 million (+0.09%), 0.86 million (-3.49%), net profit of 52 million (+45.41%), 0.59 million (+32.30%), 504 million (-12.86%), 102 million (-35.23%), and 278 million orders placed at the end of the first half of '22. It can be seen from this that the company's revenue and performance growth in '22 were mainly due to the Q3 base ratio The change in the Gaohe Q4 epidemic control policy slowed the pace of production scheduling by downstream customers. Looking ahead, production by domestic and foreign downstream customers and domestic and foreign trade will resume rapidly after the epidemic eases, which will speed up the company's order absorption capacity. Panjin's production capacity has recently been completed, and the design production capacity is more than six times that of Tianjin, which is expected to further enhance the company's ability to sign orders and lay a solid foundation for the company's performance to continue to grow rapidly and steadily.

The commercialization of major foreign projects is imminent. Three of the innovative drugs being developed overseas have completed phase 3 clinical trials and are expected to be launched one after another starting in '23, leading overseas business to a new era based on rapid growth of commercialized new drugs: one submitted an NDA in 2022, and is expected to be commercialized in Q4 this year, one is expected to submit an NDA by the end of this year, and one is expected to submit an NDA in the first half of 2024. We believe that sales of new overseas drug projects are high, and the PEG raw materials used are also expensive types, which can bring a clear increase in the company's performance. For example, according to the company's investor relations activity record table 0929, the indications for the ongoing NDA project are myasthenia gravis. Customers expect the peak sales to reach 1 billion US dollars. According to the American Myasthenia Gravis Foundation, there are about 36,000 to 60,000 cases of myasthenia gravis in the US, but effective and accessible treatments are still limited, mainly thymectomy and rituximab (in refractory achabr-+ myasthenia gravis) New drugs supported by the company are expected to quickly gain popularity after approval for marketing, such as methotrexate (lack of evidence of RCT), and eculizumab (annual treatment costs of more than 400,000 US dollars).

If macrogol irinotecan (JK-1201I) is successfully marketed, it is expected to become the mainstream drug for tumors such as glioma. The novel hyaluronic acid technology route can target high-end imported products. Development of innovative products based on macrogol technology progressed rapidly in '22. The JK-1201I small cell lung cancer clinical trial has now been approved for clinical phase III, and the glioma clinical trial is in phase II. JK-1201I has ideal efficacy and safety compared to traditional irinotecan and irinotecan liposome theory. Irinotecan has been included in treatment guidelines for various cancers, and targeted drugs and immunotherapy for glioma are still in the development stage. It can be seen that JK-1201I's long-term sales are expected to reach a high level. Clinical trials of hyaluronic acid medical and aesthetic products (JK-2122H) are expected to end in November 2023. The cross-linking technology of this product is based on PEG, which is safer than BDDE, and is expected to target imported products such as Juveden and Reilan.

Maintain a “buy” rating. Looking at the long term, the company is a leading enterprise in the global PEG derivatives industry, mastering the core technology of the entire derivative production industry chain. Product quality and customer resource advantages are obvious, and it is expected to share the dividends of the PEG modification application market expansion. Net profit for 23-25 is expected to be $2.60/345/$419 million, maintaining the “buy” rating.

Risk warning. Product orders fell short of expectations; customer cooperation fell short of expectations; new product development fell short of expectations; competitive pressure was greater than expected.