Main points of investment

Items:

The company released its semi-annual report in 2019, with an income of 456 million yuan, an increase of 33.51% over the same period last year, a net profit of 52.79 million yuan, an increase of 29.68% over the same period last year, and a net profit of 51.24 million yuan, up 29.65% over the same period last year. The company's performance is in line with expectations.

Of this total, Q2 achieved an income of 245 million yuan in a single quarter, an increase of 38.91% over the same period last year, a net profit of 30.52 million yuan, an increase of 28.66% over the same period last year, and a net profit of 30.11 million yuan, up 28.55% over the same period last year.

Peace viewpoint:

The company's performance is in line with expectations, and the API business has become a new growth point: 2019H1 achieved an income of 456 million yuan (+ 33.51%) and a net profit of 52.79 million yuan (+ 29.68%), in line with previous expectations. The company's gross profit margin in the first half of the year was 82.09% (- 3.91 pp), mainly due to the rapid increase in the scale of API and intermediate business with lower gross profit margin. The expense rate is 67.09% (- 3.55 pp), of which the sales expense rate is 58.19% (- 2.99 pp), which is also due to the increase in the scale of API business and its low sales expense rate. 2019H1 achieved an income of 37.59 million yuan from its API and intermediate business.

The main varieties have maintained rapid growth, and the research project has entered the harvest period: the sales of Torasemide, the core product, are 186 million yuan (+ 34%) and 14.13 million (+ 30%) in the first half of the year. Torasemide's leading position in the market is further consolidated, and the annual sales are expected to be close to 3000 million. The sales of cefotiam was 64.36 million yuan (+ 20%), 3.91 million (+ 9%), 22.16 million yuan (+ 102%), 290300 (+ 129%), 22.02 million yuan (+ 55%) and 58000 (66%), respectively. Due to the maintenance of injection water manufacturers and clinical use monitoring and other reasons, sales of lansoprazole were 28.35 million yuan (- 22%) and 1.21 million units (- 19%).

In terms of research and development, the company's first small-volume injection vinpocetine has been approved; the production declaration of Rivashaban has been accepted; and the release of randilol has been completed and has been submitted to CDE; to submit an application for registration for Greiluo, which is under review. From the perspective of the follow-up layout, the new four types of projects such as Apexaban, Dabiga ester, tenofovir and riglitine will gradually fall to the ground, and the company is expected to enter the rhythm of approving 1-2 high-end generic drugs every year.

The introduction of NMS's new IDH inhibitor project, innovation synergy kicked off: the company signed a license agreement with NMS to introduce the small molecule IDH inhibitor project I111b, obtaining its global exclusive development and commercialization rights, with a project valuation of US $45.9 million and a down payment of 750000 euros. Delivery of preclinical candidate compounds by 2020. IDH inhibitors are potential small molecule targeted drugs in recent years. At present, FDA in the United States has approved two IDH inhibitors, ivosidenib and enasidenib, developed by Agios Company, to be used to treat AML patients with IDH1 gene mutation and IDH2 gene mutation, respectively. The company introduced innovative drug varieties from NMS, which opened the prelude to the cooperation between the two sides, and greatly strengthened Haichen Pharmaceutical's innovative drug research and development capability. At the same time, the company plans to build a production base of innovative drugs and preparations in Anqing High-tech Zone, which is expected to form a two-wheel drive pattern of high-end generic drugs and innovative drugs in the future.

Profit forecast and investment rating: the company's core products continue to expand rapidly and are expected to benefit from a new round of health insurance adjustment, high-end generic drugs are expected to hit the ground one after another, and APIs add new profit growth points. With the prelude to the coordinated development with NMS, the strength of innovative drug research and development has greatly increased.

We maintain the company's 2019-2021 EPS forecast of 0.94,1.19,1.48 yuan respectively, and the current stock price is 32 times PE in 2019, maintaining the "recommended" rating.

Risk tips: 1) Core products are included in the scope of volume procurement: the winning varieties for the first time are on the ground one after another, and the second batch of varieties is opened in 2020. If multiple varieties are involved, it will have an adverse impact on the company. 2) R & D progress is not as expected: at present, the company has a number of R & D projects in the registration process, of which vinpocetine and randilol are expected to be approved in the near future, but drug review may be delayed due to uncertain factors such as policy. 3) merger and acquisition integration is not as expected: at present, NMS has launched the first round of financing to support projects under research, but there are still a large number of funding needs in the follow-up, if it can not be solved well, it will affect the integration and cooperation between the company and NMS.