Key points of investment

Incident: The company announced its 2022 annual report. For the full year of 2022, it achieved revenue of 791 million yuan in 2022 (+49.22% compared to +49.22%), achieved net profit of 131 million yuan (+614.22% compared to the previous year), and achieved net profit of 79 million yuan after deducting non-return to the mother (-62 million yuan in 2021). The company announced its 2023 quarterly report that Q1 of 2023 achieved revenue of 277 million yuan (+148.75% year-on-year, +1.18% year-on-year), achieved net profit of 35 million yuan (same period last year - 23 million yuan), and achieved net profit of 20 million yuan after deducting non-return to the mother (-37 million yuan for the same period last year).

Comment: The sales revenue of volmetinib continued to increase month-on-month. First-line indications approved and successfully included in the medical insurance catalogue are expected to significantly improve product space and accessibility. There are many expansions of volmetinib indications, and the opening of international multi-center phase III clinical trials for the EGFR20 exon mutation NSCLC is expected to continue to improve. As volmetinib was released, the scale effect gradually became apparent, and the management and R&D cost rate declined.

Profit forecast and valuation: With the approval of first-line and second-line treatment for the blockbuster product volmetinib, the smooth progress of clinical trials for indications such as adjuvant treatment and 20 exon mutation, and the successful launch of the product overseas, the company is expected to rapidly release volume and open up future space on the sales side. The research pipeline will also gradually enter the clinical stage. We have adjusted our profit forecasts. We expect EPS of 2023-2025 to be 0.59 yuan, 1.10 yuan, and 1.70 yuan, corresponding to the closing price on April 28, 2023. The price-earnings ratios corresponding to the closing price on April 28, 2023 will be 51.5X, 27.5X and 17.9X respectively , maintaining the “increase in holdings” rating.

Risk warning: New drug development falls short of expectations, product sales fall short of expectations, etc.