Main points of investment

2023H1 income is growing rapidly, and net profit is turning from loss to profit. The company released the semi-annual report of 2023: (1) 2023H1, the company achieved revenue of 478 million yuan (+ 40.28%, the same increase, the same below), mainly due to the continuous growth of Yisep and Septin and the increase in CDMO orders; the net profit of returning to the mother was 95 million yuan (- 7 million yuan in the same period last year), deducting 84 million yuan in non-return net profit (- 29 million yuan in the same period last year), turning losses into profits compared with the same period last year. The sales and management expenses are 126 million yuan (+ 7.03%) and 35 million yuan (- 22.76%) respectively, and the expense rates are 26.41% (- 8.20pp) and 7.24% (- 5.91pp) respectively. With the reduction of anti-tumor and ophthalmology pipeline investment and the expansion of sales scale, the R & D expenditure rate continues to improve; 2023H1 R & D investment of 165 million yuan (+ 11.62%), R & D expenditure rate of 34.56% (- 8.87pp). (2) 2023Q2, the company's revenue is 270 million yuan (+ 50.19%), the net profit is 61 million yuan, and the non-return net profit is 55 million yuan.

The listed products continue to expand, and CDMO contributes to the new increment of performance. (1) Yisaipu: 2023H1 realized sales revenue of 304 million yuan (+ 24.98%). As an old target drug of TNF- α, in the face of the increasingly competitive market environment in the field of rheumatoid and ankylosing diseases, on the one hand, it increases the market penetration and continues to promote the market sinking by winning the bid through collective mining; on the other hand, it launches the water injection dosage form in March 2023 to contribute to a new source of income growth. (2) Septin: focus on HER2-positive advanced breast cancer and occupy the first-line position of drug use. With the success of contract renewal in 2023, the lifting of medical insurance restrictions and the deepening of the concept of anti-HER2 treatment for HER2-positive breast cancer, 2023H1 covered more than 1300 hospitals and achieved sales revenue of 109 million yuan (+ 60.46%). In terms of indication expansion, neoadjuvant therapy for HER2-positive breast cancer is in phase Ⅱ; (3) Ginapax: as the only humanized anti-CD25 monoclonal antibody listed in China, sales revenue reached 28 million yuan (+ 45.43%) in 2022, and 2023H1 revenue increased by 34.27% compared with the same period last year. The price of Jennipa is stable and is expected to continue to maintain a steady growth trend. (4) in the year of CDMO:2022, the company's CDMO business was comprehensively upgraded, transforming from passive order acceptance to independent operation of Shanghai Shengguo Pharmaceutical. In 2022, the business achieved operating income of 100 million yuan (+ 159.81%) and 2023H1 revenue growth rate of 191.69%. With the expansion of the scope of CDMO business contacts, it is expected to bring new performance growth points.

The product pipeline is further checked and exempted, which is ahead of the research progress. The company is developing a total of 12 products, covering autoimmunity, oncology and ophthalmology. Among them, five rights and interests of products under research in the field of oncology and ophthalmology were granted to Shenyang Sansheng in April 2023. After the completion of the transaction, the company will focus on innovative research and development in the field of autoimmunity. The research and development of autoimmune pipeline is progressing rapidly: 608 (IL-17A) is in clinical Ⅲ phase for moderate and severe plaque psoriasis, and 613 (IL-1 β) acute gouty arthritis is in clinical Ⅲ phase. The clinical Ⅱ phase of 611 (IL-4R α) adult moderate and severe atopic dermatitis has reached the main end point, the indication of chronic sinusitis with nasal polyps has entered Ⅱ phase, the clinical application of Ⅱ phase of chronic obstructive emphysema has been accepted, and the clinical Ⅱ phase of 610 (IL-5) severe eosinophilic asthma has been completed.

Investment suggestion: the company ploughs innovative research and development of antibodies in the field of autoimmunity, with rich target layout, leading the progress of pipeline research and gradually entering the harvest period; the performance of listed products blossoms at many points, the new increment of CDMO contribution performance, and the company has a broad space for growth. It is predicted that the company's homing net profit from 2023 to 2025 will be 125 million RMB 140 won, with a growth rate of 153%, 13% and 29%, respectively. Cover for the first time, give "increase holdings-A" suggestion.

Risk hints: industry policy risk, new drug research and development risk, uncertainty risk of products under research, less than expected commercialization risk and so on.