Event: the company announced its semi-annual report of 2023, with operating income of 3.356 billion yuan (+ 16.92%), net profit of 267 million yuan (- 10.82%) and non-return net profit of 268 million yuan (- 8.81%). From a quarterly point of view, single Q2 achieved an operating income of 1.803 billion yuan (+ 20.05%) and a net profit of 134 million yuan (- 21.84%).

Comments:

In the first half of 2023, the company's gross profit margin was 33.86%, a year-on-year reduction of 3.48pcts, mainly due to fierce market competition in the same industry, customer order gross margin was compressed, and the net profit margin was 7.95%, a decrease of 2.59pcts compared with the same period last year. In terms of expenses, the sales / management / R & D / financial expense rates of 23H1 are 9.49% 6.22% 7.26% 0.95% respectively, which is different from the same period last year.

-1.70pcts/-0.20pcts/-0.83pcts/1.05pcts, of which the financial expenses are + 61.15% compared with the same period last year. On the one hand, the increase in borrowing by 23H1 leads to an increase in interest expenses on loans; on the other hand, foreign exchange rate fluctuations lead to an increase in exchange losses.

From the perspective of business, the income of aseptic preparation was 898 million yuan (+ 30.04%), the income of testing and packaging was 760 million yuan (- 25.55%), the income of bioengineering was 602 million yuan (+ 32.81%), the income of solid preparation was 304 million yuan (+ 67.53%), and the income of pharmaceutical water was 451 million yuan (+ 102.33%). From a regional point of view, the domestic income is 2.567 billion yuan (+ 18.95%), the gross profit margin is 35.26% (- 5.11pcts), the income in Europe is 384 million yuan (+ 62.12%), and the gross profit margin is 29.29% (+ 6.61%). The income of Asia (except China) is 202 million yuan (- 16.54%) and gross profit margin is 34.02% (+ 1.77pcts). The income of the Americas is 137 million yuan (+ 3.63%) and the gross profit margin is 24.93% (- 3.81pcts).

The company continues to give full play to the advantages of aseptic preparation business unit and intelligent backpack inspection business unit, and further breakthroughs have been made in bioengineering and disposable consumables: Chutian Siyou has provided product testing for hundreds of customers. established order cooperation with dozens of customers; Chutian microspheres provided product testing for more than 600 customers around the world, got positive feedback from hundreds of customers, and formed some orders. Chu Tiansi has launched a fully automatic cell culture production system for Kang, and has obtained some orders; a variety of products in the field of complex preparations have been introduced to the market, and nuclear drug equipment has established an absolute position in the domestic market. In addition, 23M4 has set up Chu Tian Keyi, which is mainly engaged in the R & D, manufacture, sales and service of high-end centrifuges and other scientific instruments, and further conquers the neck projects in the front-end field of bioengineering.

Profit forecast: we expect the company's net profit from 2023 to 2025 to be 605 million yuan, 696 million yuan and 895 million yuan (the original forecast for 2023-24 is 815 million yuan and 1.067 billion yuan), an increase of 6.6%, 15.1% and 28.5% respectively over the same period last year. The company is a leading pharmaceutical equipment manufacturer in China, with overall solutions for water and solid preparations, outstanding product quality and manufacturing and processing capabilities, diversified and international layout to open room for long-term growth, reference to comparable companies, we give the company 2023 20 times PE (formerly 2022 20x), corresponding to the target price 20.50 yuan (excluding the impact of equity incentive amortization for 17 times PE), given a "better than the market" rating.

Risk hints: the risk that the expansion of consumables business is not as expected; the risk that overseas market expansion is not as expected; the risk of rising raw material costs; the risk of intensified market competition.