Key points of investment

Recently, Ganli Pharmaceutical released its report for the third quarter of 2020. During the reporting period, the company achieved operating income of 2,192 million yuan, an increase of 18.26% over the previous year; achieved net profit of 686 million yuan, an increase of 3.74% over the previous year; and achieved net profit of 692 million yuan after deducting non-return mother's net profit, an increase of 10.79% over the previous year.

Profit prediction and rating: As the first Chinese company to successfully develop, produce and industrialize recombinant insulin analogs in China, the company has long been in a leading position in the domestic third-generation insulin industry. With the company's active layout in overseas markets in recent years, its competitiveness in the international market has continued to improve, which is expected to usher in new performance growth points. At the same time, competition in the domestic diabetes medication pattern is intensifying, and bioanalogues face the risk of being collected and reduced in price. We adjusted our profit forecast for the company. We expect the company's EPS for 2020-2022 to be 2.33, 3.01, and 3.45 yuan respectively, and the corresponding PE for the stock price on October 28, 2020 will be 53X, 41X, and 36X respectively, maintaining the “prudent increase” rating.

Risk warning: insulin sales fall short of expectations; development of new products is progressing slower than expected; overseas market development falls short of expectations; risks associated with centralized procurement.