2023H1 realized revenue of 521 million yuan and net profit of 65 million yuan. In the first half of 2023, the company realized operating income of 521 million yuan, year-on-year + 9.31%; net profit of 65 million yuan, + 12.12%; deduction of non-net profit of 63 million yuan, + 13.07%; and basic earnings per share of 0.1095 yuan, compared with 0 in the same period last year. 0977 yuan. 2023 is the key year for the company to continue to build a new Dongbao team spirit, strengthen the core competitiveness of TO B, and fully explore the C-end market of TO. Driven by the recovery of the consumer market, the growth of residents' disposable income, the aging population and other factors, the market for medical (pharmaceutical) health products will continue to grow steadily, bringing good opportunities for the development of gelatin, collagen, hollow capsules and nutrition and health products industry, coupled with the company's high-quality products and industry-recognized brand value. Promote the company to obtain stable and high-quality customer resources, solid market share and certain market bargaining power, so as to ensure the long-term and stable development of the company in the future.

The gross profit margin has increased steadily, and the expense rate has been well controlled. The company's gross profit margin in the first half of 2023 is 26.20%, year-on-year + 0.30pct; on the expense side, the expense rate during the first half of 2023 is 9.25%, year-on-year-0.57pct, in which the sales expense rate / management expense rate / R & D expense rate / financial expense rate is 1.79%, 4.97% and 2.49%, respectively, plus 0.01pct/-0.35pct/+0.18pct/-0.41pct. Among them, the financial expenses were 14443.48 yuan, a decrease of 99.25% over the same period last year, mainly due to the fact that the borrowing amount of the current period was less than that of the same period last year, the interest expenses decreased accordingly, and the interest income of the current period was higher than that of the same period last year. The company's net interest rate in the first half of 2023 was 13.56%, year-on-year + 0.70pct.

Gelatin, capsule business integration, production capacity continues to improve. From a product point of view, the revenue of gelatin series and by-product calcium hydrogen phosphate / collagen series / capsule products was 320 million yuan / 27 million yuan / 169 million yuan respectively, which was + 11.07%, 25.66%, 13.13%, 13.13%, respectively, and the gross profit margin was 26.02%, 28.77%, 26.32%, respectively, compared with the same period last year-1.56pct/2.86pct/3.96pct. At present, the company has an annual production capacity of 13500 tons of gelatin, 4300 tons of collagen, 24 billion tablets of Yiqing biological hollow capsules, and the "Intelligent industrialization Project of New Hollow capsules" with an annual output of 15 billion tablets is under construction and implementation. The "Intelligent industrialization expansion Project of New Hollow capsules" with an annual output of 30 billion tablets has been launched. After all the projects are completed and put into production, Yiqing Bio will become a professional production base of hollow capsules with the highest production capacity, complete product categories and high intelligence in China. The company's gelatin and capsule business forms the integration of the industry chain and has a good ability to extend.

Focus on core categories and implement differentiation strategy. The company has "prairie fresh bovine bone" as the main raw material of "round element" series of small molecular collagen peptide products, selected prairie fresh bovine bone as raw material to produce differentiated collagen high-end peptide. Through the implementation of differentiation strategy, differential promotion of raw material ingredients and star endorsements, the company promotes brand awareness, fully does a good job in the drainage and flow transformation of various marketing platforms, and makes every effort to promote the differential marketing of collagen series products. strengthen brand image, enhance brand effect, and further cultivate consumers' awareness and loyalty to the "Yuansu" brand. Gradually build the "Yuansu" brand into a well-known brand of national collagen.

Issue convertible bonds to further promote the upgrading of the company's industrial chain and consolidate the foundation for development. In August 2023, the company issued convertible corporate bonds and listed on the stock market, raising a total of 455 million yuan. After deducting the issuance expenses, the net fund raised is expected to be about 442 million yuan. The funds raised this time will be invested in the new hollow capsule intelligent industrialization expansion project and supplement the company's liquidity, through this issuance company's financial strength will be stronger, on the basis of the existing business to further improve the industrial layout, consolidate and improve the market position.

Investment suggestion: the company focuses on the whole industry chain of natural collagen, forming a production, R & D, sales and service system of high-quality bone grain base-gelatin-collagen-nutritional health products / medicinal materials. formed a good technical reserve, brand effect and customer reputation. In recent years, the company has further accelerated the strategic landing, continuously improved the efficiency of operation and management, actively intensified technological innovation, and developed extended products around gelatin, collagen and hollow capsules, with layout in "medicine, health, food and beauty". With the rapid development of the collagen industry and the continuous improvement of public health awareness, the company's revenue is expected to achieve sustained growth. We predict that the EPS of the company from 2023 to 2025 will be 0.23,0.26,0.29 respectively, and the corresponding PE will be 27.4X, 23.7X and 21.4X respectively, maintaining the investment rating of "increasing holdings".

Risk hint: the expansion of business scale may bring management risk, market competition aggravates risk, raw material price fluctuation risk, retail series product market expansion process may exist the risk of mismatch between input and return, policy risk, the risk of raising funds for investment projects does not meet expectations.