Event: the company's income in the first three quarters of 2022 was 321 million yuan (+ 22.59%), net profit was 165 million yuan (+ 16.03%), net profit after deducting non-return was 157 million yuan (+ 20.72%), Q3 income was 106 million yuan (+ 0.09%), net profit was 54 million yuan (- 12.86%), net profit after deducting non-return was 61 million yuan (+ 15.95%). Overall performance is in line with expectations.

Income is growing against the trend under the pressure of high base and epidemic situation. The company's revenue from commercial product orders from foreign LNP (mainly used for the production of COVID-19-related nucleic acid drugs) reached 39.4692 million yuan in the first three quarters of 2021. With the relief of the epidemic, the demand for this part of the company declined. The company's revenue from foreign LNP commercial product orders in the first three quarters of 2022 was 24.7534 million yuan, excluding the impact of foreign LNP commercial product order revenue. The company's product revenue, overall income and net profit in the first three quarters of 2022 increased by 27.36%, 33.21% and 30.04% compared with the same period last year. Based on this, we speculate that the commercialization of the company's non-LNP-related projects has steadily increased, and the clinical phase has been progressing in an orderly manner. In addition, the epidemic situation in Tianjin has repeatedly and abruptly increased in the first three quarters of 2022, which is obviously worse than that in the same period in 2021, which has a certain impact on the company's production end. We believe that at present, the company has sufficient orders on hand, and the company's product sales will achieve better market performance after the epidemic is alleviated.

Step up research and development, and the authorization of heavyweight self-research products is in sight. The company's R & D expenses were 61 million yuan (+ 68.97%) in the first three quarters of 2022 and 18 million yuan (+ 1.38%) in Q3, mainly due to the promotion of R & D projects from the beginning of the year to the end of the reporting period and an increase in the number and salary of R & D personnel, reflecting that a number of heavyweight self-research products are expected to be licensed in the future, bringing a new engine for the company's sales growth: irinotecan is in clinical II phase. Clinical data show that its efficacy has the potential to surpass the similar products of the major competitors in the world, and the progress of research and development is higher than expected. Hyaluronic acid gel for medical beauty has been clinically put into the group, which has the advantages of low toxicity and long-lasting effect, and the effect can be standardized against the high-end imported product Ruilan 2; in addition, the company's research project also includes the preclinical tumor immunosuppressive biological drug JK-1119I, and the follow-up research on non-gel medical beauty products will be started.

Panjin factory is expected to help digest orders soon. The project under construction at the end of the company's Q3 reached 144 million yuan, an increase of 51% compared with the end of the first half of the year. We speculate that the Panjin plant is expected to be put into use soon, which can produce some non-GMP products (intermediates, etc.), thus helping to digest orders on hand and support the rapid and steady growth of product sales in the future.

Maintain a "buy" rating. In the long run, the company is the leading enterprise in the global PEG derivatives industry, mastering the core technology of the whole industry chain of derivative production, has obvious advantages in product quality and customer resources, and is expected to share the market expansion dividend of PEG modification applications. It is estimated that the net profit of homing in 22-24 years will be RMB 332,487 million, maintaining the "buy" rating.

Risk hint. The number of product orders is not as expected; the progress of customer cooperation is not as expected; the research and development of new products is not as expected; the competitive pressure is greater than expected.