Items:

Recently, the company released the mid-2023 report that 2023H1's operating income is 1.37 billion yuan (- 1.5%), deducting non-net profit is 480 million yuan (+ 8.8%); single Q2 operating income is 701 million yuan (+ 40.2%), deducting non-net profit is 233 million yuan (+ 346.9%). 2023Q2's performance has returned to the high growth channel under a low base.

Comments:

Collection disturbance clear, Q2 performance ushered in an inflection point. The results of the national collection of insulin have been implemented since May 22 and have been implemented for more than one year, and the company's performance has digested the pressure of price reduction. Year-on-year results in the second quarter of this year, 22Q2 channel offset offset revenue of 200 million, in the same period with a low base, 23Q2 performance achieved high growth; month-on-month point of view, the steady growth of insulin products, 23Q2 revenue growth of 5.4% compared with the same period last year, the profit of 23Q2 declined slightly, mainly due to the sharp reduction in 23Q1 sales expenses, resulting in a relatively high profit base of Q1.

The second generation of insulin increased steadily, and the third generation of new products were released rapidly. 2023H1's insulin business (API + preparation) achieved an income of 1.164 billion yuan (- 0.34%). According to the Rubik's cube data, 2023H1's second-generation insulin market share is 44.6%, ranking first in the country, and the share of the third-generation glargine and Mendong continues to increase.

Research and development progress steadily, in the research pipeline is expected to usher in the harvest. The company accelerates the clinical progress of products, and the efficiency of research and development is improved rapidly. 1) 23Q4 Lilaru peptide diabetes is expected to be approved and become the second domestic Lilaru peptide bioanalogue; 2) in 25-26 years, the company is also expected to concentrate on the market of overspeed preserved insulin, Lai preserved 25, glycine preserved double insulin and de Gu insulin. With the listing and sale of new products, the company's performance growth will be more diversified in the future. 3) the company's URAT1 inhibitors and URAT1/XO dual-target inhibitors are expected to read IIa and I data respectively this year, and there may be room for further improvement in the company's valuation.

Investment advice: Tonghua Dongbao is a leading domestic insulin enterprise, the company is out of the impact of collection, performance is expected to return to the high growth channel. We expect the company's homing net profit from 2023 to 2025 to be 10.1,12.1 and 1.45 billion yuan respectively, with year-on-year changes of-36.1%, 19.3% and 20.4%. According to the DCF model, we expect the reasonable valuation to be 29.1 billion yuan and the corresponding stock price to be 14.6 yuan in 2023. Maintain the "push" rating.

Risk tips: 1, insulin special set to renew the contract to reduce prices; 2, the deterioration of the competition pattern of the insulin industry; 3, the progress of research and development of some products lags behind.