Events:

On August 23, 2023, the company released its half-yearly report for 2023. 2023H1, the company realized operating income of 3.356 billion yuan (YoY+16.92%), net profit of 267 million yuan (YoY-10.82%), net profit of 268 million yuan (YoY-8.81%), net cash flow from operating activities of-185 million yuan (YoY+47.12%) and total assets of 11.194 billion yuan (YoY+1.33%).

2023Q2, the company realized operating income of 1.803 billion yuan (YoY+20.05%), net profit of 134 million yuan (YoY-21.84%), and non-return net profit of 126 million yuan (YoY-19.71%).

Comments:

1. There are plenty of orders on hand, and the revenue scale is growing steadily. The company's aseptic preparation, solid preparation, pharmaceutical water and other production equipment has been recognized by customers for its excellent operating performance, the brand image has been further improved, and the order on hand is more sufficient. 2023H1, the company's aseptic preparation business achieved revenue of 898 million yuan (YoY+30.04%), bioengineering business income of 602 million yuan (YoY+32.81%), pharmaceutical water business income of 451 million yuan (YoY+102.33%), solid preparation equipment income of 304 million yuan (YoY+67.53%). The revenue scale of the main business increased steadily. In addition, accessories and after-sales business income 236 million yuan (YoY+4.56%), testing and packaging business income 760 million yuan (YoY-25.55%), EPC engineering design service revenue 19 million yuan (YoY+11.02%).

two。 The operating efficiency has been further improved and the gross profit margin of the product has declined. The sales expense rate of 2023H1 Company is 9.49% (- 1.70pct), the management expense rate is 6.22% (- 0.20pct), and the R & D expense rate is 7.26% (- 0.83pct). The operation efficiency is further improved. However, due to the slowdown of global economic growth, increased competition in the same industry, compression of customer order gross margin and other factors, the company's comprehensive gross profit margin of 33.88% (- 3.55pct), of which pharmaceutical water equipment and engineering system integration decreased by 7.96%, bioengineering solutions and stand-alone decreased by 6.11%, solid preparation solutions and stand-alone decreased by 5.18%.

3. A complete pharmaceutical industry chain has been gradually formed, and domestic and foreign markets have been expanded in an orderly manner. In April 2023, the company set up Chutian Technology, mainly engaged in high-end centrifuges and other scientific equipment business, further conquered the neck project in the front-end field of bioengineering, and set up Chutian Jingbang in June, mainly engaged in purification, EPC project, etc., a complete pharmaceutical industry chain has been gradually formed. Under the background of intensified competition in the industry, while the company further deepens exchanges and cooperation with domestic pharmaceutical companies and maintains a leading position in China, it also accelerates the acquisition of new orders based on the advantages of international SSC in overseas markets, and the company's global customer center is also officially put into use.

4. Continuous increase in R & D investment, talent introduction and new product development. 2023H1's R & D expenditure is 244 million yuan (YoY+4.98%). On the one hand, it introduces a large number of high-end technical personnel and increases the reserve of fresh college graduates. There are more than 2000 R & D personnel now. On the other hand, the company and its major domestic subsidiaries have 2991 valid patents, 23 valid PCT international patents and 256software copyrights as of 2023H1, including 98 new invention patents and 12 authorized invention patents from January to June 2023.

Profit forecast: we expect the company's revenue from 2023 to 2025 to be 77.37,92.61 and 10.891 billion yuan respectively, with year-on-year growth rates of 20.03%, 19.70% and 17.61% respectively, and net profit of 7.06,8.74% and 1.073 billion yuan respectively, with year-on-year growth rates of 24.41%, 23.84% and 22.71% respectively. The corresponding share price PE is 11,9 and 7 times respectively, taking into account the impact of industry clean-up and rectification. Downgrade to "recommended" rating.

Risk tips: subsidiary management risk, R & D progress is not as expected, new orders are less than expected, industry competition intensifies, market policy adjustment risk, international environment change and so on.