The negative impact of collection was unleashed, and the performance bottomed out imminent: the company's revenue in 2022 was 9.150 billion yuan (+9.8% year-on-year, same below); if all were based on pharmaceutical sales revenue, revenue for the period was 10.498 billion yuan (+13.7%). By sector, the cardiovascular, digestive, ophthalmology, and skin business lines recorded revenue of 4,045 billion yuan (+7.6%), 3.612 billion yuan (+11.9%), 440 million yuan (+14.1%), and 344 million yuan (+10.1%) respectively. Gross profit was 7.036 billion yuan (+12.6%), which increased to 76.9% (+2.0pp) thanks to product structure optimization. Sales expenses were 2,721 million yuan (+7.1%), and sales expenses ratio was 29.7% (-0.8 pp). Administrative expenses were 637 million yuan (+44.4%), and the administrative expenses rate was 7.0% (+1.7pp), mainly due to increased labor costs. R&D expenditure was 731 million yuan, accounting for 8.0% of total revenue, and the cost conversion rate was 17.2%. Annual profit of 3.276 billion yuan (+8.3%), net interest rate of 35.8% (-0.5pp). The company's financial situation is healthy, with cash on account of 4,376 billion yuan, operating cash flow of 3,553 billion yuan, and a balance ratio of 10%.

The innovation pipeline entered the commercial sales harvest period, taking the lead for rickizumab: the company's major innovative product in the self-exemption field, tiriquizumab (IL-23 p19 monoclonal antibody, trade name: eilutsu) was approved for sale in China in May this year to treat moderate to severe plaque psoriasis in adults. It is the first IL-23 approved among domestic pharmaceutical companies. Phase III clinical results in China showed that the response rate of PASI 75, the main efficacy evaluation index, reached 91.3% in week 52, with good safety and tolerability. Multiple head-to-head clinical studies have shown that the efficacy of IL-23 antibodies is superior to IL-17 antibodies, which has led to rapid release of IL-23 in clinical use and rapid market share expansion. Looking at the number of patients, there are more than 7 million psoriatic patients in China, and more than 30% of cases have progressed to moderate to severe cases. Considering that the Yilu maintenance period is administered once every 12 weeks (that is, 4 doses per year), the frequency of administration is lower than once every 8 weeks of Johnson & Johnson Gusecumab (IL-23), patient compliance is better. In addition to this, Yilutsu is sold and promoted by Kang Zhemei, which will benefit from the synergistic effect of dermatological and aesthetic platform expert network resources. We believe that Yilutsu is expected to rapidly increase volume, with a potential sales peak of more than 2 billion yuan. In addition, diazepam nasal spray and methylene blue enteric tablets (bowel cancer screening and diagnosis agents) are about to be approved. In the next 3 years, there will still be many major innovative varieties such as Plenity (weight management), ultrasonic body sculptors (fat loss), deldostatin tablets (CKD, nephropathy, anemia), and lucotinib cream (vitiligo), etc., entering the commercialization stage one after another, driving continued growth in performance.

The organizational structure of the Southeast Asian market has been completed to comprehensively explore the local policy+economy+demographic dividend: Kanglianda Health's core management team has been formed. The executive talent comes from major overseas pharmaceutical companies. The general manager, Dr. Li Keying, has 20 years of pharmaceutical marketing and management experience in China and Southeast Asia, and has rich registration experience in the local Southeast Asian market. It is hoped that with favorable Southeast Asian pharmaceutical market policies, he will lead the team to explore the dividend period of the Southeast Asian economy and rapid population growth to meet the huge clinical demand for cost-effective and high-quality drugs. Currently, a number of innovative assets have been incorporated into Kanglianda, including eyeOp1 glaucoma treatment device, Tianmai insulin, treprizumab, lucotinib cream, VEGF+ANG2 quadrivalent bifacial eye drugs, etc. Among them, EyeOp1 and Kangbisen have been marketed and sold in some Southeast Asian countries. In addition to this, products that have been approved in Europe and the US and that meet ICH standards domestically do not require clinical trials in Southeast Asia and can be marketed for sale in just 1-2 years, greatly shortening the commercialization implementation cycle and laying a good foundation for deepening the Southeast Asian market.

Maintain the target price of HK$20.50, purchase rating: We fully consider the influence of the collection of Dailixin, Boyding, and Yusford, conservatively consider the value of innovative pipelines and dermatological and aesthetic products, and do not consider the contribution of Southeast Asia's business. Based on the PE valuation method, we estimated the target price of HK$20.50, with room for an increase of 68.6% from the current price. Corresponding to the price-earnings ratio of 2024 12 times, we maintain the purchase rating.