Incident: The company released its 2022 annual report, achieving revenue of 783 million yuan, an increase of 19.86% over the previous year, achieving net profit of 175 million yuan, an increase of 45.43% over the previous year, and achieving net profit of 164 million yuan after deducting non-return mother's net profit of 164 million yuan, an increase of 51.51% over the previous year. At the same time, the company released its report for the first quarter of 2023, achieving revenue of 194 million yuan, an increase of 5.73% over the previous year, achieving net profit of 52 million yuan, a year-on-year decrease of 3.51%, and net profit of 47 million yuan after deducting non-return mother's net profit of 47 million yuan, a year-on-year decrease of 11.88%.

Performance grew steadily in 2022, and core products continued to be sold: main revenue was 783 million yuan in 2022 (+19.86% year on year), net profit of 175 million yuan (+45.43% year on year), net profit of 164 million yuan after deducting non-return mother net profit (+51.51% year on year). The performance was in line with expectations. Thanks to the company's strong commercialization and promotion capabilities in OTC channels, the sales revenue of the company's core products “Aitingjiu” dapoxetine hydrochloride tablets and gastroenterological pills increased significantly in 2022. Volittin's sales revenue declined slightly. Gender-related health medications achieved revenue of 229 million yuan (+48.48% year-on-year), gastrointestinal medicines achieved revenue of 158 million yuan (+36.47% YoY), and ophthalmic drugs achieved sales revenue of 185 million yuan (-8.50% YoY). In terms of cost rate, the company's sales expense ratio in 2022 was 20.09% (+2.15pct year on year), the R&D expense ratio was 5.16% (+1.11pct year on year), and management expenses were 7.02%, which is basically the same as in 2021.

Increased investment in R&D and technology transfer led to a high base. Short-term turbulence in 23Q1 performance was disrupted: 23Q1 companies achieved operating income of 194 million yuan (+5.73% year-on-year), net profit of 52 million yuan (-3.51% year-on-year), net profit of 47 million yuan after deducting non-return mother's net profit (-11.88% year-on-year). The reason for the short-term fluctuation in performance was mainly due to the company's increase in R&D investment, and the R&D expenditure ratio increased significantly (8.20%, +4.6pct year over year).

R&D pipelines are abundant, and the endogenic+epitaxial layout opens up room for growth: the company has now established key technology platforms for functional excipients and nano-drug delivery, key technology platforms for biomacromolecule drugs, and generic drug development and consistency evaluation technology platforms. Self-developed pipelines include improved new drug micellar products, biosimilar drugs such as ranibizumab, drugs for gender health, ophthalmology and chronic diseases of the elderly. In February 2023, the company acquired 50% of Bochuang Park's shares. Currently, Bochuang Park is developing products mainly CKBA, which covers the fields of chronic skin diseases such as vitiligo. Currently, in addition to carrying out phase IIa clinical study for psoriasis adaptation, CKBA has initially completed pre-clinical research on vitiligo indications and will submit phase II IND applications for vitiligo indications as soon as possible.

Profit forecasts and investment suggestions: The company is deeply involved in the gender health and chronic disease markets, and the performance of the three core products is in line with expectations. Research pipelines are abundant, and drugs under development such as CKBA are expected to open up room for long-term growth. In 2023-2025, the company's revenue is estimated to be 10.5/1,39/1.75 billion yuan respectively, and the net profit of the mother is 29/40/52 million yuan respectively. Maintain a “buy” rating.

Risk warning: New drug marketing progress and post-marketing market performance fell short of expectations; agency business risks; market competition increased risks.