As a domestic leading enterprise of drug molecular block under kg, 2023H1 performance continues to grow steadily and rapidly. We believe that based on molecular block business, the company continues to research and develop new categories, actively expand the business of new materials / new energy / life sciences, and the market share is expected to continue to increase. At the same time, the company actively distributes the global market and accelerates fund-raising projects. The number of customers and single customer income still have great potential. It is in a period of accelerated development. To sum up, we give the company 2023 PE 45X, corresponding to the target price of 103 yuan, to maintain the "buy" rating.

The performance continued to grow in line with expectations, and the market share increased against the trend. The annual operating income of the company's 2023H1 was 523 million yuan, up 41.76% over the same period last year; the net profit from home was 84 million yuan, up 41.63% from the same period last year; deducting 92 million yuan from non-parent net profit, an increase of 56.51% over the same period last year; of which 23Q2 realized operating income of 270 million yuan, up 41.00% from the same period last year; net profit from home was 47 million yuan, an increase of 38.92% over the same period last year The non-return net profit was 53 million yuan, down 9.88% from the same period last year. In terms of profitability, the company's 2023H1 gross profit margin was 40.72%, down 5.11% from the same period last year. The company's comprehensive gross profit margin continued to decline mainly because the company followed the market trends through strategic analysis and adjusted the price policy around the market trends to reduce the price of products to basically the same level as the same industry in the market. The net interest rate was 16.04%, a decrease of 0.01pct compared with the same period last year; the company's 2023H1 annual sales expense rate / management expense rate / R & D expense rate / financial expense rate changed respectively compared with the same period in 2022-0.61/-1.06/+0.12/-3.59pcts (cumulative reduction of 5.15pcts). 2023Q2 net interest rate is 17.35%, down 0.01% from the same period last year-the company's 23Q2 sales expense rate / management expense rate / R & D expense rate / financial expense rate has changed respectively compared with the same period in 2022-0.27/-0.82/-0.63/-4.96pcts (cumulative reduction in 6.69pcts).

Molecular block as the core, multi-dimensional business continues to expand. From a sub-business point of view, the income of 2023H1's molecular block business is 450 million yuan, an increase of 38.80% over the same period last year, mainly due to the continuous expansion of the company's market share in molecular blocks and the continuous improvement of brand influence. the company has a complete library of molecular block products in China. According to the company's report, the number of spot products has reached 103000, and continues to grow. The product lines of boric acid, boric acid esters and fluorine-containing blocks built by the company continued to expand during the reporting period. The company's scientific research reagent business achieved a business income of 68 million yuan, an increase of 65.02% over the same period last year, mainly due to the growth of the company's life science products. In addition, according to the company's report, the company has opened up new energy business and cooperated with domestic well-known new energy companies such as BYD and Ningde Times; at the same time, it has established business relations with leading enterprises such as Huawei in the field of new materials. In terms of products, the company's 2023H1 molecular block heterocyclic compounds sales income is 233 million yuan, molecular block benzene ring compounds sales income is 136 million yuan, molecular block aliphatic compounds sales income is 85 million yuan, scientific research reagent catalyst and ligand sales income is 49 million yuan, scientific research reagent life science sales income is 19 million yuan.

The customer base is constantly expanding, improve the supply chain management and improve the efficiency of global layout. From a regional point of view, the company's 2023H1 domestic sales revenue was 257 million yuan, an increase of 38.35% over the same period last year, while overseas sales revenue was 266 million yuan, an increase of 45.21% over the same period last year. In the first half of the year, the company continued to strengthen the upgrading of domestic regional centers such as Shanghai, Shenzhen, Tianjin, Chengdu and Wuhan, while optimizing the layout of warehousing and operation centers in the United States, Europe and India to improve the timeliness of supply and reduce the logistics radius. By the end of 23H1, the company has set up three overseas regional centers in the United States, Germany and India, and has set up warehouses in Shanghai, Shenzhen, Tianjin, Chengdu and Wuhan. Relying on the efficient linkage between the Shanghai headquarters and the global regional centers, the service radius of customers at home and abroad has been greatly shortened. According to the company's report, the company supplied more than 10,000 customers in the past 12 months, an increase of about 18% compared with 2022; the company's inventory at the end of the reporting period was 632 million yuan, an increase of 21.08% over the end of the previous year, mainly due to the increase in the company's stock volume and the number of spot product types reached 103000; as of the end of 23H1, the company had 723 employees, an increase of 106 compared with the end of 2022. At the same time, the company through upgrading ERP system, WMS system, improve the supply chain and business management network, improve the global layout efficiency. With the combination of multiple measures, the efficiency of customer R & D has been greatly improved. The company continues to reduce procurement prices through strong management of upstream suppliers, with an overall price reduction rate of more than 40% for repeatedly purchased raw materials during the reporting period.

Risk factors: high risk related to the company's ending inventory balance; the impact of the company's sales and changes in sales magnitude on gross profit margin; geopolitical and policy risk; the risk of price fluctuation of the company's products; the risk of exchange gains and losses; the risk of a decline in global investment in new drug research and development; the risk of sales compliance.

Profit forecast, valuation and rating: as a domestic leading enterprise of pharmaceutical molecular blocks under kg class, the performance of 2023H1 continues to grow steadily and rapidly. We keep the company's net profit forecast unchanged for 2023-2025. The corresponding EPS forecast for 2023-24-25 is 2.29ppm 3.08pm 4.09 yuan, and the current price is 32x/24x/18x corresponding to PE.

We refer to comparable companies (Aladdin, Titan Technology, Pharma Technology and Haoyuan Pharmaceuticals) with a consensus expectation of 30 times average PE in 2023. Considering that the company's business is focused on the front end of new drug research and development, and actively expand the business in the field of new materials / new energy / life sciences, the market share is expected to continue to increase. At the same time, the company actively arranges the global market and accelerates fund-raising projects, the number of customers and single customer income still have great potential to increase. It is in a period of accelerated development, so it will give the company 45 times PE in 2023, corresponding to a target price of 103 yuan, maintaining a "buy" rating.