Event: the company released its three-quarter report in 2020, with revenue of 2.714 billion yuan in the first three quarters, down 23.25% from the same period last year, realizing a net profit of 479 million yuan, down 18.24% from the same period last year, and 456 million yuan after deducting it, down 18.74% from the same period last year. Of this total, revenue in the third quarter was 1.212 billion yuan, down 1.87% from the same period last year, achieving a net profit of 251 million yuan, an increase of 23.13% over the same period last year, and 238 million yuan after deducting non-return net profit, an increase of 18.80% over the same period last year. Q3 performance has an obvious improvement trend compared with the previous month.

The three fees decreased in the first three quarters, and the net interest rate increased slightly compared with the same period last year.

The net cash flow generated by operating activities in the first three quarters was 424 million yuan, down 6.83% from the same period last year. The net operating cash flow / operating income was 15.63%, an increase of 2.75% over the same period last year. In the first three quarters, the gross profit margin was 90.93%, down 1.85pp from the same period last year, and the net profit rate was 17.61%, an increase of 1.05pp over the same period last year. In terms of period expenses, the sales expenses, management expenses, R & D expenses and financial expenses in the first three quarters were 1.637 billion, 112 million, 168 million and-18.7249 million respectively, accounting for 60.32%, 4.11%, 6.20% and-0.69% of the total income, respectively, compared with the same period last year-1.01pp,-1.03pp, 0.55pp,-0.35pp.

The epidemic situation had a negative impact in the first half of the year, and there was a significant recovery in the third quarter. The number of outpatients and operations in domestic hospitals were greatly affected in the first half of the year, which greatly affected the sales of the company's injection-based products. The epidemic tended to ease in the second and third quarters, and medical institutions gradually returned to normal operation. In the first half of the year, the PPI products of some provinces of Ausaikang won the bid, but the core provinces of the country still maintained the qualification to win the bid, and some new provinces were added. Since the new analgesic drug "pareoxib sodium for injection" entered the market in the second half of 2019, 25 provinces have been successfully connected, showing a good growth trend; the first domestic DPP-4 inhibitor, Saglitine tablets for the treatment of Ⅱ diabetes, has been linked to cover 27 provinces, and it is expected to achieve rapid growth through policies such as the use of drugs in two diseases and supporting over-evaluated drugs to replace the original research and development.

The company increased R & D investment, creating new drugs + high-end first imitation series steadily promoted the company's R & D investment of 395 million yuan in the first three quarters, an increase of 54.9% over the same period last year, accounting for 14.6% of sales revenue. The company focuses on four major treatment areas: digestive tract ulcers, tumors, drug-resistant bacterial infections and diabetes. Consolidate the leading edge of proton pump inhibitor injection product group, the product line covers five of the six PPIs listed in China, most of which are the first or the first batch to go on the market. The company is in the forefront in the consistency evaluation of injections, not only in China, but also in a leading position in the progress of each variety. All the five PPI injections listed on the market have submitted applications for consistency evaluation, of which 3 are the first in China and 2 are the second in China. Posaconazole injection, enteric-coated tablets and right rabeprazole sodium for injection are all the first reported production in China, and are expected to be the first to appear on the market within this year; levopantoprazole sodium for injection and polymyxin E sodium methanesulfonate for injection are the second reported production in China. It is also expected to be approved to go on the market within this year.

In the field of oncology, the third-generation EGFR inhibitor class 1 innovative drug ASK120067 targeting T790M can be conditionally approved to market after the completion of the clinical phase Ⅱ study. At present, the Ⅲ phase clinical study of the first-line drug is also being carried out at the same time. This year, due to the impact of the epidemic, patient enrollment and follow-up have been affected to varying degrees, the company's clinical team has taken targeted measures, such as the use of information technology, combined with the opinions of statistical experts and clinical experts, as far as possible to obtain test-related data and information in time to reduce the shedding of cases. With the gradual relief of the epidemic across the country, clinical research has returned to normal. It is expected to complete the Ⅱ phase clinical enrollment by the end of the year and apply to CDE for listing in 2021. In addition, the anti-tumor biological innovative drug ASKB589 injection, which is intended to be used for gastric and gastroesophageal junction adenocarcinoma, pancreatic cancer and other indications, has been approved clinically, and no similar products have been approved to market at home and abroad, which is expected to further enrich the echelon of innovative drug products.

Innovation + high-end first imitation multi-point blossom, optimistic about the company's long-term development to maintain the "buy" rating company as the domestic leading enterprise of PPI injection, PPI injection forms a "product echelon + consistency declaration leader + differentiated chiral PPI", which is expected to occupy a comparative advantage in injection collection in the future. In the field of oncology, drug-resistant bacterial infection and diabetes, the company's forward-looking layout is expected to create a new performance growth point in the future. In the long run, the company is developing a number of important "innovative drugs + high-end first imitation"

The differential layout of series varieties is expected to be transformed successfully by means of "independent research and development + variety introduction". Maintain the previous profit forecast, the company's 2020-2022 net profit is expected to be 721 million yuan (yoy-7.66%), 804 million yuan (yoy+11.52%), 921 million yuan (yoy+14.47%), corresponding to PE is 21 times, 19 times, 16 times, maintain the buy rating.

Risk hints: new drug research and development risk; drug review progress is slower than expected; product sales are lower than expected; injection collection price reduction risk