Performance summary: in the first half of 2023, the company's operating income was 2.81 billion yuan, up 3.93% from the same period last year; the net profit was 357 million yuan, down 27.79% from the same period last year; deducting 358 million yuan from non-net profit, down 26.82% from the same period last year; among them, the company's quarterly operating income was 1.4 billion yuan in the second quarter of 2023, down 8.37% from the same period last year; the net profit in a single quarter was 163 million yuan, down 44.73% from the same period last year The deduction of non-net profit in a single quarter was 166 million yuan, down 43.16% from the same period last year.

Comments: the market share of the pharmaceutical sector is expanding steadily, and the profitability of the animal protection plate is under pressure. With the opening of the global epidemic policy in the second quarter of 2022, the export demand of the company's human and pharmaceutical products increased significantly, which led to a significant improvement in the company's performance, resulting in a high performance base in the second quarter of 22. In the first half of 2023, the field of medicine and health achieved sustained and healthy development. The main products of Guobang Pharmaceutical Company have maintained stable production and management, and the expansionary products have been continuously developed. Product shipments continue to increase, and the market share is relatively stable and improved. With the large-scale process of the animal health industry exceeding expectations, the increase of supply-side production capacity leads to intensified competition.

The prices of major veterinary APIs are low. Taking florfenicol as an example, the price of florfenicol was 430-470 yuan / kg in the second quarter of 2022, and once fell below 300 yuan / kg in the second quarter of 2023. The industry has entered a loss stage, and enterprises are facing a reshuffle stage. The company relies on its cost advantage and channel layout to further increase its market share. At present, the overall livestock and poultry market prices have entered the relative bottom position and are expected to gradually pick up, and with the gradual climbing of the company's production capacity, the company's profitability is expected to be improved.

The construction of the company's key projects, including fund-raising projects, has progressed steadily, the first phase of the florfenicol project with an annual output of 4500 tons has entered the critical stage of equipment installation, and the second phase of the project with an annual output of 1500 tons of doxycycline has completed trial production and entered the stage of acceptance and certification; the construction of sodium borohydride series product projects has entered the stage of equipment installation and adjustment, and Guobang Life Science and Technology Industry Park has been completed and put into operation. In the future, the product category will become more and more diverse, and the performance is expected to grow further.

With the increase of the proportion of large-scale breeding farms and the improvement of animal protection, the company grasps the advantage of product quality and constantly enriches the product matrix. In 2022, there were 700 million pigs in the country, and the total number of ten listed pig farming enterprises reached 120 million, accounting for about 17%, an increase of 3 percentage points compared with 21 years. On the other hand, the new version of GMP was officially implemented to raise the entry threshold of the veterinary drug industry and eliminate backward production capacity. The company develops animal protection API and preparation business with rich product matrix and strong comprehensive competitive advantage. the leading products florfenicol and enrofloxacin contribute more than 100 million in revenue and have a high market share. the main products also include doxycycline, cypromazine, dikezuril and mabofloxacin, which are widely used in the field of animal protection.

"one system, two platforms" creates a comprehensive advantage. The pharmaceutical sector develops synchronously and promotes the integration of the industrial chain. One system refers to effective management and innovation system. The two platforms are advanced and complete large-scale manufacturing platform and extensive and effective global market channel platform. In terms of production and manufacturing, the company has mastered the typical chemical reaction and solvent technology in production, and saved costs through integrated research layout to form the advantage of intensive manufacturing. In terms of channel platform, the company serves customers at home and abroad, integrates domestic and foreign trade, covers sales networks on six continents, sells products to 115 countries and regions, and has established trade and cooperative relations with more than 3000 customers around the world. The company has established API sales channels in India, the Netherlands, South Korea, Pakistan and Spain, and semi-preparation products are also sold to Southeast Asia and Africa. In the pharmaceutical business, the company is one of the world's largest suppliers of macrolides and quinolones, including antibiotics, cardiovascular, respiratory, urinary and antineoplastic drugs. The main products azithromycin, clarithromycin, roxithromycin, ciprofloxacin hydrochloride are sold more than 100 million yuan of single strains. At the same time, the company carries out the production of key pharmaceutical intermediates, focusing on reducing agent series products, advanced amine series products, etc., to create an integrated layout of intermediate-API-preparation industry chain.

Profit forecast and investment advice. It is estimated that the EPS from 2023 to 2025 will be 1.41,1.88 and 2.35 yuan respectively, and the corresponding dynamic PE will be twice as much as that in 16-12-9. Give the company 15 times PE in 2024, corresponding to the target price of 28.2 yuan, to maintain the "buy" rating.

Risk hints: project construction is not as expected, product sales are not as expected, sudden epidemic situation in the aquaculture industry and other risks.