Recommendation logic: 1) the company's postharvest insulin sales increased significantly to promote the rapid growth of income. The size of China's insulin market exceeded 20 billion yuan in 2022, and there is still much room for improvement. Ganli Pharmaceutical Insulin products were released sharply after winning the bid, 2023H1 domestic income increased by about 35% compared with the same period last year, and domestic insulin preparation sales increased by 104.7%. 2) the application for listing of third-generation insulin in overseas market was accepted, and the long-term profit of insulin going out to sea was considerable. The company granted Sandoz the right to sell three third-generation insulin in Europe and the United States and other regions. BLA applications for related products have been formally accepted by FDA and EMA one after another, and there is a broad space for long-term profit growth in European and American markets. 3) the equity incentive target shows the confidence of the company. The performance evaluation target for 2023-2025 is 3, 6 and 1.1 billion yuan respectively, and the compound growth rate of the performance target during the period is more than 90%.

After collection, the sales of insulin increased significantly, and the equity incentive goal showed the confidence of the company. We estimate that the size of China's insulin market will exceed 20 billion yuan in 2022, and China's insulin permeability will be 21% in 2021, less than 1/3 of that in the United States. Driven by structural upgrading, permeability enhancement, import substitution and other factors, there is a broad space for market growth in the future. The company has five varieties of insulin analogues and one human variety of insulin. The sales of insulin products of the company increased rapidly after harvest. The domestic income of 2023H1 company increased by more than 30% compared with the same period last year, and the domestic sales of insulin preparations increased by 104.7%. According to the company's 2022 equity incentive plan, the company's performance evaluation targets for 2023-2025 are 3 yuan, 6 yuan and 1.1 billion yuan respectively, with a compound growth rate of more than 90%.

The application for listing of the third generation insulin in the overseas market has been accepted, and the long-term profit space in the overseas market is considerable. In December 2018, the company granted Sandoz exclusive sales rights of insulin glargine, insulin lysine and insulin aspartate in the United States, Canada, Europe and other regions. Sandoz will pay the company a licensing fee of $23 million, related clinical development milestone fees and a share of sales profits. In the first half of 2023, the company has submitted BLA applications for Glycerin, Lai preserved and Mendong Insulin to FDA respectively. We estimate that the profit margin of the company's three types of insulin in the US market is about 13-1.7 billion yuan. In August 2023, the company's application for listing of insulin glargine was also formally accepted by the European EMA. According to IDF, there are more than 61 million people with diabetes in Europe. If the company's products are approved to be listed in Europe and the United States, there will be a broad potential market in the future.

Focus on the research and development of new drugs in the field of diabetes, and lay out the fields of autoimmunity and tumor. The company insists on independent innovation and research and development, while making a breakthrough in the field of diabetes treatment, it has actively invested in drug research and development in other fields, and has laid out R & D pipelines in the fields of autoimmunity, oncology and other drug research and development. The core varieties that the company is studying include GZR18 (GLP-1 agonist week preparation), GZR4 (fourth generation insulin), GZR101 (premixed double insulin compound preparation) and so on.

Profit forecast and investment suggestion: the net profit of the company from 2023 to 2025 is estimated to be 300 million yuan, 640 million yuan and 1.15 billion yuan respectively, corresponding to PE of 82, 38 and 21 times respectively. The company is a domestic third-generation leading enterprise of insulin, with broad potential for going out to sea, covering for the first time and giving a "hold" rating.

Risk hints: research and development is less than expected risk, commercialization is less than expected risk, market competition aggravates risk, drug price reduction risk.