What happened: the company released the 2021 annual report and the first quarterly report of 2022, the operating income in 2021 was 1.258 billion yuan, up 6.21% from the same period last year, and the net profit was 143 million yuan, down 8.62% from the same period last year, deducting 126 million yuan from non-net profit, an increase of 56.46% over the same period last year. In the first quarter of 2022, the operating income was 500 million yuan, an increase of 47.86% over the same period last year, and the net profit was 115 million yuan, an increase of 128.92% over the same period last year, deducting 109 million yuan from non-net profit, an increase of 142.73% over the same period last year.

Income has increased steadily, and CDMO and preparations have been released continuously. In 2021, the company's income increased steadily, mainly driven by the rapid growth of CDMO and preparation business. Of this total, CDMO revenue was 265 million yuan, up 118.31% over the same period last year; preparation revenue was 153 million yuan, up 103.58% over the same period last year; and revenue from API and intermediates was 748 million yuan, down 21.50% from the same period last year. We expect it to be mainly caused by the pace of delivery and the decline in prices. In a single quarter, 21Q4 income is 339 million yuan (year-on-year + 38.29%, the same below), net profit is 7.13 million yuan (- 72.93%), non-net profit is 11.61 million yuan (- 124.45%); 22Q1 income is 500 million yuan (+ 47.86%), net profit is 115 million yuan (+ 128.92%), and non-net profit is 109 million yuan (+ 142.73%). The rapid growth of 22Q1 revenue is mainly driven by CDMO and preparation business, with growth rates of 296.09% and 50.87% respectively. Profit growth is faster than income growth, mainly because of the increase in gross profit margin. 22Q1 gross profit margin is 40.49% (+ 5.51pp).

The gross profit margin has gradually increased, and the rate of expenses for the three items has remained stable. The gross profit margin of 2021 and 2022Q1 were 37.29% (+ 0. 5%) respectively.

84pp), 40.49% (+ 5.51pp), the gross profit margin gradually increased, mainly due to the rapid growth of CDMO and preparation business with high gross margin on the one hand, and significant scale effect on some products on the other hand. The total expense rates of the three items are 17.44% (+ 0.12pp) and 11.21% (- 2.66pp), respectively. The three fee rates remain basically stable, of which the 22Q1 management expense rate is 8.91% (- 2.13pp), mainly due to the decline in equity incentive cost sharing and the rapid growth of income.

CDMO, preparations continue to make efforts, API varieties, customers continue to enrich. 1) accelerate the layout of CDMO business to build a growth point for future performance. The company signed a 10-year CDMO strategic cooperation agreement with Merck & Co Inc in the fields of pet medicine, veterinary medicine and animal health. The 2021 annual report revealed that the first phase of 9 projects have been carried out in different stages, and technology transfer has been gradually completed and is about to be commercialized. At the same time, the company actively arranges small nucleic acid CDMO business to provide raw materials for domestic mainstream nucleic acid testing products and build new growth points. 2) the preparation business actively implements the strategy of "technology transfer + independent declaration + domestic MAH cooperation", collection and collection of varieties continue to release, a number of self-developed and cooperative preparation varieties are expected to be approved and listed one after another, and the preparation transformation is accelerated. The company won the bid for perindopril tert-butylamine tablets and pregabalin capsules in the fourth batch of national drug centralized procurement; Atto vastatin calcium tablets, losartan potassium tablets, lisinopril tablets relay collection continued bid, won the bid Guangdong 13 provinces joint collection, Jiangsu region, Shandong region collection, the pace of preparation transformation is accelerated. In terms of self-developed and cooperative varieties, at present, the company has 7 preparation products on the domestic market, including gliclazide sustained-release tablets, isoniazid tablets (generic drug consistency evaluation), valsartan hydrochlorothiazide tablets, rivasaban tablets, moxifloxacin hydrochloride tablets and vegletine tablets, including 8 products under CDE review. Eight products, including valsartan amlodipine tablets, amlodipine atorvastatin calcium tablets, bisoprolol fumarate tablets, propofovir fumarate tablets, Englenovir tablets, daglitazine tablets, metformin tablets, clopidogrel sulfate tablets, etc., are in the formal BE stage, and more than 30 products are under development. 3) APIs welcome new production capacity, new customers and new varieties. In terms of production capacity, the expansion of the three API production bases has increased the production capacity of about 2500 tons of APIs and intermediates, laying the foundation for future growth. Xuancheng Minohua has entered the volume stage. Customers, on the basis of major customers KRKA, continue to open up new customers and new markets. In terms of products, the company has achieved more than 20 international and domestic commercial varieties, focusing on the core treatment field. Valsartan, esomeprazole magnesium, moxifloxacin hydrochloride, sioglitine phosphate, rosuvastatin calcium and other new processes or new products are being developed and registered at an accelerated pace.

Profit forecast and investment advice: according to the latest announcement, considering the sustained and rapid growth of the company's CDMO and preparations, and the high performance brought about by the elasticity of COVID-19 's business orders, we adjust our profit forecast. The company's 2022-2024 revenue is expected to be 18.04,23.75,2.959 billion yuan (15.23,1.913 billion yuan before adjustment in 2022 and 2023), an increase of 43.3%, 31.7% and 24.6% over the same period last year. The net profit of homing is 3.02,4.14 and 567 million yuan (before the adjustment in 2022 and 2023).

9.7 billion yuan), an increase of 112.1%, 37.1% and 36.9% over the same period last year; the corresponding EPS is 1.98,2.72,3.72 yuan.

The current share price of the company corresponds to 2022-2024 times PE on 25-19-14, considering that the company is in the stage of expansion and upgrading of APIs and accelerated transformation of preparations and CDMO, and maintains a "buy" rating.

Risk reminder events: environmental risk, quality risk, risk of price fluctuation of APIs and intermediates, risk that product research and development does not meet expectations, risk of delayed or untimely updating of public information.