The steady increase in performance paid out a cash dividend of 240 million yuan. In the first three quarters of 2022, the company achieved operating income of 1,439 million yuan, +14.60% year on year; net profit of 324 million yuan, +10.75% year on year; net profit of non-return mother was 305 million yuan, +24.38% year on year. At the same time, the company also announced a profit distribution plan for the first three quarters of 2022: under the condition that the company's normal operation and long-term development are guaranteed, investors will be given a reasonable return, taking into account the overall interests of shareholders and the long-term development of the company, according to a cash dividend of 4.00 yuan (tax included) for every 10 shares, and it is estimated that a total cash dividend of 235 million yuan (tax included) will be distributed. In the Q3 quarter alone, the company achieved revenue of 442 million yuan (+18.03% year-on-year, -7.52% year-on-year), net profit of 21 million yuan (+-53.03% year-on-year), and net profit of 15 million yuan (+97.43% year-on-year) after deducting net profit of non-return mother. Q3 There was a large decline in net profit of the mother, mainly due to share payments and an increase in financial expenses.

Product brand leadership is the company's main competitive strength. Through years of operation, the company has formed strong brand leadership in throat and oral medicine and urological medicine, representing the three gold medal watermelon cream series and three gold tablets, which have become leading brands of similar proprietary Chinese medicines in the country. Currently, the company and its subsidiaries have 218 drug approvals, of which 46 are exclusive specialty varieties, 70 product regulations have entered the national basic drug catalogue, and 113 product regulations have entered the national medical insurance catalogue. Furthermore, the company is also actively developing biopharmaceuticals. During the reporting period, Baochuan Biotech, which holds the company's holding company, received an approval letter from the US FDA approving BC007 antibody injections for the treatment of advanced solid tumors for clinical trials. Regarding biopharmaceutical research and development, the company has also stated that it will consider starting a foreign financing model without losing control.

Overall financial prudential management expenses have increased. In the first three quarterly reports of 2022, the company's sales, management and financial expenses rates were 24.36%, 11.81%, and -0.40% respectively, and -0.31pct, +3.11pct, +0.88pct, respectively; the R&D expenses ratio was 8.85% (year-on-year -4.67pct); the company's gross profit margin and net profit margin were 72.41% (+1.64pct) and 22.54% (-0.79pct) respectively.

There has been a significant increase in management expenses, mainly due to the sequential billing of share payments.

[Investment advice]

The company has abundant product reserves, continuous improvement in brand leadership, and continues to consolidate its leading position in the fields of oral and throat medicine and urological medication. It is committed to promoting the construction of traditional and innovative channels, which is expected to increase the sales and market share of brand products. The increase in performance is basically in line with our expectations. We maintained the company's revenue for 2022/2023/2024 to RMB 20.17/23.23/2,655 billion yuan respectively, slightly increasing the company's management expenses ratio, and slightly lowering the net profit of the parent to RMB 3888/479/552, respectively, and EPS to RMB 0.66/0.82/0.94 respectively. Maintain an “increase in holdings” rating.

[Risk Reminder]

Risk of policy changes in the pharmaceutical industry;

Market competition increases risk;

Risk of fluctuations in the cost of raw and auxiliary materials;