Performance summary: according to the third quarterly report of Guobang Pharmaceutical in 2023, the company's main income was 4.053 billion yuan, down 1.46% from the same period last year; the net profit was 489 million yuan, down 32.17% from the same period last year; and the non-net profit was 483 million yuan, down 31.75% from the same period last year. Among them, the company's main revenue in the third quarter of 2023 was 1.244 billion yuan, down 11.78% from the same period last year. The net profit of returning to the mother in a single quarter was 132 million yuan, down 41.78% from the same period last year, while the non-net profit in a single quarter was 126 million yuan, down 42.75% from the same period last year.

Comments: animal protection plate competition intensified, profitability is expected to gradually improve in the future. The prices of some of the company's major products fell significantly in the third quarter compared with the same period last year, resulting in a decline in product profit margins and net profits. The company's gross profit margin in the third quarter was 24.65%, down 13.14% from the same period last year. In 2023, the field of medicine and health has achieved sustained and healthy development.

The main products of Guobang Pharmaceutical Company have maintained stable production and management. With the large-scale process of the animal health industry exceeding expectations, the increase of supply-side production capacity leads to intensified competition. The prices of all major veterinary APIs are low. Taking florfenicol as an example, the price in the third quarter of 2022 is about 460 yuan / kg, and the price continues to decline in the third quarter of 2023. As of October 18, the price is only 224 yuan / kg. The industry has entered a loss stage, and enterprises are facing a reshuffle stage. The company relies on its cost advantage and channel layout to further increase its market share. At present, the overall livestock and poultry market prices have entered the relative bottom position and are expected to gradually pick up, and with the gradual climbing of the company's production capacity, the company's profitability is expected to be improved.

The construction of the company's key projects, including fund-raising projects, has progressed steadily, the first phase of the florfenicol project with an annual output of 4500 tons has entered the critical stage of equipment installation, and the second phase of the project with an annual output of 1500 tons of doxycycline has completed trial production and entered the stage of acceptance and certification; the construction of sodium borohydride series product projects has entered the stage of equipment installation and adjustment, and Guobang Life Science and Technology Industry Park has been completed and put into operation. In the future, the product category will become more and more diverse, and the performance is expected to grow further.

With the increase of the proportion of large-scale breeding farms and the improvement of animal protection, the company grasps the advantage of product quality and constantly enriches the product matrix. In 2022, there were 700 million pigs in the country, and the total number of ten listed pig farming enterprises reached 120 million, accounting for about 17%, an increase of 3 percentage points compared with 21 years. On the other hand, the new version of GMP was officially implemented to raise the entry threshold of the veterinary drug industry and eliminate backward production capacity. The company develops animal protection API and preparation business with rich product matrix and strong comprehensive competitive advantage. the leading products florfenicol and enrofloxacin contribute more than 100 million in revenue and have a high market share. the main products also include doxycycline, cypromazine, dikezuril and mabofloxacin, which are widely used in the field of animal protection.

"one system, two platforms" creates a comprehensive advantage. The pharmaceutical sector develops synchronously and promotes the integration of the industrial chain.

One system refers to effective management and innovation system. The two platforms are advanced and complete large-scale manufacturing platform and extensive and effective global market channel platform. In terms of production and manufacturing, the company has mastered the typical chemical reaction and solvent technology in production, and saved costs through integrated research layout to form the advantage of intensive manufacturing. In terms of channel platform, the company serves customers at home and abroad, integrates domestic and foreign trade, covers sales networks on six continents, sells products to 115 countries and regions, and has established trade and cooperative relations with more than 3000 customers around the world.

The company has established API sales channels in India, the Netherlands, South Korea, Pakistan and Spain, and semi-preparation products are also sold to Southeast Asia and Africa. In the pharmaceutical business, the company is one of the world's largest suppliers of macrolides and quinolones, including antibiotics, cardiovascular, respiratory, urinary and antineoplastic drugs. The main products azithromycin, clarithromycin, roxithromycin, ciprofloxacin hydrochloride are sold more than 100 million yuan of single series. At the same time, the company carries out the production of key pharmaceutical intermediates, focusing on reducing agent series products, advanced amine series products, etc., to create an integrated layout of intermediate-API-preparation industry chain.

Profit forecast and investment advice.

Risk hints: project construction is not as expected, product sales are not as expected, sudden epidemic situation in the aquaculture industry and other risks.