Core views: 1) The company's actual net profit situation is relatively good, and momentum is exchanged: after adding back losses in the biopharmaceutical sector in 2021, the net profit growth rate was 64.2%, and the employee stock ownership plan was released in 21, binding long-term performance, showing confidence; 2) Holding the Sanjin and Watermelon Cream series brands to vigorously promote second-tier product sales: The company's Sanjin series and watermelon cream series products are well-known brands, and second-tier varieties are expected to usher in a period of rapid development; 3) 23 may be Baifan Biotech's performance point. Biotech and Shanghai Saikin are expected to complement each other's strengths: Bai Fan Biotech is expected to achieve break-even in 23 years, and Baochuan Biotech and Jinsai Pharmaceutical are expected to achieve complementary advantages in the field of monoclonal antibodies.

The company's actual net profit situation is relatively good, and it is energized after motivation. 1) Affected by the epidemic and dragged down by the performance of the biopharmaceutical sector, the company's performance was under short-term pressure: the company achieved net profit of 392/277/344 million in 2019-2021; 2) When biopharmaceutical losses were added back, the company's actual net profit situation was better: if the company's loss expenses to expand biopharmaceutical research and development were split, the adjusted net profit in 2019-2021 was 4.23/3.35/550 million yuan, with a significant increase in net profit; 3) Equity incentives, showing confidence: the company released the first phase of the employee stock ownership plan in 2021, binding the company's long-term performance and increasing employee motivation , demonstrating confidence in development.

Holding the brands Sanjin and Watermelon Cream series, they are vigorously promoting the release of second-tier products. 1) Sanjin Pills: Sanjin Pills is an exclusive product of Guilin Sanjin. The National Health Insurance Class A variety entered the National Essential Drug Catalogue (2018 edition), the National Low-cost Drug List, and the National Health Insurance Catalogue (2021 edition). According to the Zhongkang database, the retail sales of Sanjin tablets stabilized at around 400 million yuan in the past 5 years; 2) Watermelon Cream series products: Guilin Sanjin Watermelon Cream is well-known and has a complete product matrix. The retail market share of watermelon cream series products reached 9.294 billion yuan in 2020, and the market share of watermelon cream series products was about 8.01% in Western China. Sales situation of melon cream series products It's impressive. The second-tier varieties as a whole are developing rapidly, and individual products stand out. The company achieved total sales of vertigo tablets and vertigo tablets of over 100 million in '21, and over 100 million in single doses of vertigo tablets in '22. Other second-tier varieties, such as cerebral phlegm and clam relief capsules, etc., have remarkable curative effects and great potential for market development. As the company increases its promotion efforts, second-tier varieties are expected to usher in a period of rapid development.

Year 23 may be an inflection point in Baifan Biotech's performance, and Baochuan Biotech and Shanghai Saijin are expected to achieve complementary advantages. 1) Subsidiary company A wholly-owned subsidiary of Shanghai Sanjin Biotech: Baochuan Biotech: focuses on the development of monoclonal antibody drugs; Baifan Biotech:

Committed to providing high-quality antibody drug CDMO/CMO services; 2) Losses all year round, 23 years may face transformation:

According to public research records, Baifan Biotech is expected to achieve break-even balance in 23 and begin to gradually contribute to performance; 3) The company signed an investment framework cooperation agreement with Saijin Biotech: Guilin Sanjin plans to become the largest shareholder and hold shares of Shanghai Saijin through cash and full equity payments of Sun's wholly-owned company Baochuan Biotech. If the investment cooperation is successfully implemented, it is expected that complementary advantages will be achieved.

Investment advice: The company owns the Sanjin series and watermelon cream series of Chinese medicine varieties from well-known domestic brands, and as the company gradually increases its promotion efforts, second-tier varieties are expected to enter a stage of rapid development, and Baifan Biotech, a subsidiary of the company, is expected to reach an inflection point, reducing the drag on the company's profits. We expect the company's net profit to its mother to reach 37/42/5.1 billion in 2022-2024, respectively. First coverage, giving a “buy” rating.

Risk warning: Product development progress falls short of expectations, product sales fall short of expectations, medical insurance fee control risks, and there is still a risk of uncertainty about investment cooperation with Saijin Biotech