Incident: The company released its semi-annual report for 2023, achieving revenue of 3.36 billion yuan, +16.9% year on year, net profit of 270 million yuan over the same period, -10.8% year on year, after deducting net profit of 270 million yuan without return, net profit of 270 million yuan, +8.8% year on year. Among them, we achieved revenue of 1.8 billion yuan in a single second quarter, +20.1% year on year, net profit of 130 million yuan, or -21.8% year on year, after deducting non-return net profit of 130 million yuan, or -19.7% year on year.

The revenue side grew steadily, and the expense ratio remained stable. The company's performance grew steadily in the first half of 2023. In terms of profitability, the company's gross sales margin in the first half of the year was 33.9%, -2.2 pp from the first quarter; the net sales interest rate was 8%, and 0.9 pp from the first quarter. Net cash flow from operating activities in the second quarter alone was 150 million yuan, an increase of 480 million yuan over the first quarter. It is expected that downstream customers will pick up and pay for goods one after another in the second quarter. The company's overall cost rate remained stable. The cost rate during the 23H1 period was 23.9%, an increase of 0.2 pp over the previous year. Among them, the sales expenses rate was 9.5%, down 1.7 pp from the previous year, the management expenses rate was 13.5%, the year on year decreased by 1 pp, and the R&D expenses rate was 7.3%, down 0.8 pp from the previous year.

Revenue from multiple sub-sectors is growing rapidly. In the first half of the year, all major sectors of the company achieved good growth. Among them, the aseptic formulation sector achieved revenue of 900 million yuan, an increase of 30% over the previous year; the bioengineering sector achieved revenue of 600 million yuan, an increase of 32.8%; the solid preparation sector achieved revenue of 300 million yuan, an increase of 67.5% over the previous year; and the pharmaceutical water and engineering systems sector revenue was 450 million yuan, an increase of 102.3% over the previous year.

The industrial chain layout continues to improve, and new product development results continue. The company continues to improve the layout of the industrial chain. The company established Chutian Keyi in April 2023, and its main business is scientific instruments such as high-end centrifuges; in June 2023, the company established Chutian Jingbang, whose main business is purification engineering, EPC engineering, etc. The company's new products have achieved many results. Chutian Sioute has provided product tests for hundreds of customers and established order cooperation with dozens of customers. Chutian Microsphere has provided product testing to more than 600 customers around the world and has formed some orders. Chu Tiansi has launched a fully automated cell culture production system for Kang, and has already received some orders. Various products in the field of complex formulations have been introduced to the market, and nuclear drug equipment has established an absolute position in the domestic market.

Profit forecasts and investment recommendations. Net profit for 2023-2025 is estimated to be 760 million yuan, 880 million yuan, and 1 billion yuan, respectively. The corresponding dynamic PE is 9 times, 8 times, and 7 times, respectively, maintaining the “buy” rating.

Risk warning: the risk that downstream customer demand does not meet expectations; the risk of increased competition in the industry; the risk that the company's new product development does not meet expectations.