Product sales grew steadily, and Sieglitazide sodium implemented health insurance prices. The company's revenue in the first half of 2023 was 242 million yuan, an increase of 12% over the same period last year, of which product sales revenue totaled 236 million yuan, an increase of 18% over the same period last year.

Cedaben sales revenue of 228 million yuan, an increase of 17% over the same period last year, its blood tumor maintained a steady growth, breast cancer indications due to the lack of health insurance sales is still small. We believe that the dose of cedarbamide should pay attention to the approval of a new indication for first-line treatment of diffuse large B-cell lymphoma, and the application for this indication has been accepted.

Sieglitazem sodium began to implement health insurance prices in March, with sales of 7.51 million yuan in the first half, an increase of 456% over the same period last year, but income increased by only 28% due to price cuts. Affected by the uncertainty of the holding time of local pharmaceutical committees and other objective conditions, Sieglitazide sodium officially admitted to more than 500 hospitals by June 2023. We believe that we should pay attention to (1) hospital access and prescription volume in the second half of the year; (2) production line 2, and the company expects to complete the verification of the expansion line and launch GMP certification in the third quarter; and (3) the progress of the indication of ciglitazide sodium combined with metformin, which has been accepted.

The investment income of Microcore New Domain turned the company around. The company made a net profit of 156 million yuan in the first half of the year, compared with a loss of 19.29 million yuan in the same period last year. The loss of non-net profit was 148 million yuan, compared with a loss of 22.58 million yuan in the same period last year. The company reversed its losses in the first half of the year, mainly because the subsidiary Micro****nyu reshuffled its board of directors after a new round of capital increase and equity incentive, Microcore could not control it, and Micro****nyu was no longer included in the scope of the company's consolidated statements. the remaining shares of the company after losing control of Micro****nyu are calculated at fair value and recognized investment income, involving an amount of 289 million yuan in the first half of the year.

Investment in research and development has been increased. The company invested 248 million yuan in R & D in the first half of the year, an increase of 89% over the same period last year, accounting for 102% of revenue, of which the total R & D expenses of Micro****nyu was incorporated into the company's report (50 million yuan for down payment and milestones for the introduction of double-resistance projects). In the first half of the year, expended R & D investment was 162 million yuan, an increase of 113% over the same period last year, while capitalized R & D investment was 85.42 million yuan, an increase of 56% over the same period last year.

Follow the progress of the company's key indications:

Cedabamide (1) first-line treatment of diffuse large B-cell lymphoma, the application for listing has been accepted and has been included in the priority evaluation process by CDE; (2) first-line combined with Nivo PD-1 in the treatment of melanoma, carried out by the partner Shanghai Sub-Biology, is conducting phase III clinical trials in 17 countries around the world. (3) cedarbamine combined with tirelizumab (PD-1 antibody) first-line treatment of PD-L1-positive non-small cell lung cancer II phase clinical, until the mid-report revealed that the progress of nearly 60%? The application for listing of ciglitazide sodium (1) combined with metformin in the treatment of type 2 diabetes has been accepted, and we believe that the approval of first-line indications will be beneficial to the expansion of the commercial dose of ciglitazone sodium. (2) the II phase of ciglitabate sodium in the treatment of non-alcoholic steatohepatitis (NASH) is expected to be completed within 2023Q3.

Sioroni (1) III phase of monotherapy for small cell lung cancer, 2023Q3 is expected to be completed; (2) Sioronil combined with paclitaxel in the treatment of platinum-refractory or platinum-resistant recurrent ovarian cancer III phase clinical, completed 1/3 of the group. Theoroni has been added to the list of breakthrough treatments by the Drug Review Center.

Profit forecast and valuation. A number of clinical trials are being carried out around the world, and we believe that the revenue of the company will continue to grow in 2023-25, and there is some uncertainty that the profit end will be affected by R & D investment. We estimate that the company's revenue in 2023-25 is 615 million yuan, 922 million yuan and 1.203 billion yuan respectively, an increase of 16%, 50% and 30% respectively over the same period last year. The net profit of 2023-25 is 282 million yuan, 33 million yuan and 95 million yuan respectively.

We assume that the sustainable growth rate is 1.25%-1.75% and the WACC value is 8.04%-8.54%, then the reasonable market value range of the company's DCF is 104.2-12.44 billion yuan, corresponding to the reasonable value range of 25.34-30.25 yuan per share, maintaining the "better than the market" rating.

Risk hint: the progress of R & D is not as expected, and the progress of commercialization is not as expected.