Event: according to the company's semi-annual report of 2023, 2023H1 achieved operating income of 3.356 billion yuan (yoy+16.92%), net profit of 267 million yuan (yoy-10.82%) and non-return net profit of 268 million yuan (yoy-8.81%).

Comments:

Revenue has maintained steady growth, and many types of business have shown good growth. In the first half of 2023, the company continued to strengthen its technical layout and market expansion. Aseptic preparation, solid preparation, pharmaceutical water and other production equipment were recognized by customers for their excellent operating performance. With sufficient orders on hand, 2023H1 achieved business income of 3.356 billion yuan (yoy+16.92%), of which Q1\ Q2 achieved revenue of 1.553 billion yuan (yoy+13.49%) and 1.803 billion yuan (yoy+20.05%) respectively. From a business point of view, in the first half of 2023, the income of aseptic preparation solution and stand-alone realization was 898 million (yoy+30.04%), bioengineering solution and stand-alone income was 602 million (yoy+32.81%), solid preparation solution and stand-alone income was 304 million yuan (yoy+67.53%), and pharmaceutical water equipment and engineering system integration was 451 million yuan (yoy+102.33%). Many types of business have shown a good growth trend, only testing packaging solutions and stand-alone business due to last year's high base, declined, achieving revenue of 760 million yuan (yoy-25.55%).

Competition intensifies the short-term pressure on gross profit margin, product structure optimization, profitability is expected to pick up. Due to increased competition, the company's gross profit margin on 2023H1 sales was 33.86%, down 3.48pp from the same period last year.

The overall expense rate of the company has declined steadily, with the sales expense rate\ R & D expense rate\ management expense rate being 9.49% (yoy-1.7pp)\ 7.26% (yoy-0.83pp)\ 6.22% (yoy-0.2pp) respectively. We believe that as the company continues to implement the strategy of "one vertical, one horizontal and one platform", make every effort to build Chutian biomedical and life science industry chain, longitudinally solve the problem of raw material jam, further optimize the cost, and horizontally expand high gross margin products. with the continuous optimization of product structure, the company's profitability is expected to pick up gradually.

Profit forecast: we expect the company's operating income from 2023 to 2025 to be 7.61 billion yuan, 9.162 billion yuan and 11.018 billion yuan respectively, an increase of 18.1%, 20.4% and 20.3% respectively over the same period last year, and the corresponding net profit reached 648 million yuan, 837 million yuan and 1.038 billion yuan respectively, an increase of 14.1%, 29.3% and 23.9% respectively over the same period last year. The stock price before the corresponding period was 11, 9 and 7 times PE.

Risk factors: the cyclical risk of the industry, the risk that the progress of technological research and development is not as expected, the risk that the progress of domestic substitution is not as expected, and the risk that the progress of overseas expansion is not as expected.