Event: according to the company's semi-annual report for 2023, 2023H1 achieved revenue of 1.92 billion yuan (year-on-year + 8.9%), net profit of 530 million yuan (year-on-year-2.2%), and non-net profit of 510 million yuan (+ 1.9%). Q2 alone achieved revenue of 1.04 billion yuan (year-on-year + 19.3%), home net profit of 250 million yuan (year-on-year + 2.6%), and non-net profit of 240 million yuan (year-on-year + 10.3%).

Biological products Compaq rapid volume, optimistic about the follow-up market growth potential. From a sub-business point of view, 2023H1's proprietary Chinese medicine sector achieved income of 680 million yuan (year-on-year + 10.8%), chemical sector revenue of 360 million yuan (year-on-year-21.5%), biological products sector revenue of 870 million yuan (year-on-year + 28.2%), and medical device revenue of 6 million yuan (year-on-year-20.1%). Overall, Compaq's volume is in line with expectations. Compex was included in the national health insurance catalogue in January 2023 and added the indication RVO, which made the biological products business grow at a relatively high speed in the first half of 23 years. Although there are many anti-VEGF products under development, from the penetration level and price reduction level, we believe that there is still great room for growth in the future market potential of Compaxip, and it is still an important variety. In terms of expense rate, the company's 23H1 management expense rate and R & D expense rate have increased slightly compared with the same period of 22 years, which affects the profit growth to a certain extent.

Rich in the research pipeline, proprietary Chinese medicine varieties and xerophthalmia Ritast may be cashed. The company continues to increase investment in research and development, in many sectors there are innovative and important varieties are about to be realized one after another. (1) proprietary Chinese medicine plate, the terminal demand of Shugan Jieyu capsule for the treatment of mild to moderate depression is relatively strong, and it is currently in the stage of rapid release, taking into account the possibility of entering the base drug catalogue in the future and the company's promotion in the field of OTC, this variety has more room for growth. In addition, the company is developing a new drug KH110 (Wujia Yizhi granule for the treatment of Alzheimer's disease) is conducting Ⅱ phase b clinical trials, the follow-up clinical results are worth looking forward to. (2) in the biological products section, the ophthalmic drug KH631 is a new biological drug used to treat neovascularization (wet) nAMD1 by delivering target genes through adeno-associated viruses. it has the characteristics of tissue specificity, immunogenicity, controllable expression and infection efficiency, and shows continuous efficacy in preclinical disease model. (3) in the chemical medicine section, KH617 for injection is a class 1 innovative drug independently developed by the company for the treatment of advanced solid tumor patients (including adult diffuse glioma). It is also the first product of the company's synthetic biology platform to be declared in clinical trials. KH617 was certified as an orphan drug for glioblastoma by FDA in the United States on February 14 this year.

Profit forecast and valuation. Taking into account the performance in the first half of 23, we estimate that the net profit of homing in 23-25 will be 1.46 billion yuan respectively, an increase of 12.6% over the same period last year. In view of the new increment brought by the approval of the company's new indications this year, the huge growth space for relieving liver and relieving depression in the traditional Chinese medicine business and the potential value of innovative traditional Chinese medicine for Alzheimer's disease, maintain the "buy" rating.

Risk tips: the risk that the sales of core products are not as expected; the risk of collection or health insurance price reduction; the risk that the progress of research and development is not as expected.