[investment points]

The policy encourages innovation and research and promotes the innovation and development of traditional Chinese medicine industry in an all-round way. In recent years, the research and development of new drugs of traditional Chinese medicine has been greatly improved. According to the CDE data of the State Drug Review Center, 43 clinical trials of traditional Chinese medicine IND were approved in 2022, + 26.47% compared with the same period last year, including 30 innovative traditional Chinese medicine IND, + 7.14% compared with the same period last year, and 10 traditional Chinese medicine NDA approved for listing, including 5 innovative traditional Chinese medicine NDA. The efficiency of approving the listing of new traditional Chinese medicine drugs has been greatly improved. From the time of approval of innovative traditional Chinese medicine in recent years, the number of months from the contractor date to the NDA status publicity period has been gradually shortened from 60-120 months in 2018-2019 to about 15 months in 2023.

"New drug R & D capability" is the company's core competitive advantage, integrates the advantages of the world's top new drug R & D resources, and sets up a high-level R & D team. By the end of 2022, the company had obtained 141 drug production approvals (including those that have been transferred and not yet completed the transfer formalities, the same below), 17 new drug certificates, 51 invention patents and 1 international patent. The rich product reserve provides a strong support for the realization of the company's strategic goals. From 2017 to January 2023, a total of 27 innovative traditional Chinese medicines were approved to be put on the market, including 3 in Hunan and 2 in Fangsheng Pharmaceutical. They are Xiaoer Jingxing Zhike granule approved in 2019 and Xuan Qi Jiangu tablet approved in 2021. From clinical application to product launch, the above two innovative traditional Chinese medicines took about 13 years and 16 years respectively. In addition, another major product of the company, Nuolitong granule (for the treatment of "frequent paroxysmal tension headaches"), is pending approval for registration.

The company is committed to building a health industry group with innovative traditional Chinese medicine as the core, with the continuous improvement of the core competitiveness of the company driven by "innovative traditional Chinese medicine research and development" and "management change".

Has successfully developed "Xin Xuean" brand cardio-cerebrovascular department, "Jinbei" brand pediatrics, "Mei er Shu" brand gynecology, "Fang Shengtang" brand orthopedics and trauma and other major brand products.

Revenue grew 4.06 per cent in 2019 compared with the same period last year, and has since achieved steady growth, with revenue CAGR of 17.89 per cent and net profit CAGR of 53.58 per cent in 2019-2022.

[investment advice]

The company is committed to creating a health industry group with innovative traditional Chinese medicine as the core, grasping the strategic highland of innovative traditional Chinese medicine, and building the basis for long-term survival and development in the future. We estimate that the company's operating income in 2023, 2024, and 2025 will be 1.811, 2.886, 2.385 million, 1.85, 2.36, and 0.64 million, respectively, respectively, and the EPS will be 0.42, 0.54 and 0.69, respectively, and the corresponding PE will be times that of 24-19-15.

[risk Tip]

Risk of industry policy change

Risk of price reduction of core products

Market competition aggravates risk

Risk of failure of R & D innovation

The growth of the main products is less than expected.