Event: The company released the third quarterly report of 2023. In the first three quarters, it realized operating income of RMB 1.352 billion yuan, with a year-on-year decrease of 1.35%, net profit attributable to parent company of RMB 404 million yuan, with a year-on-year decrease of 11.23%, and net profit deducted from non-profit of RMB 353 million yuan, with a year-on-year decrease of 19.18%.

Product structure and solid conversion affect gross profit margin, and we expect new products to continue to launch. In the first three quarters, the growth rate of revenue end of the Company declined slightly. We expect that it will be mainly affected by domestic preparations, and the export of preparations will maintain a good growth state; the fluctuation of profit end is expected to be mainly affected by product structure and solid conversion, resulting in short-term pressure on gross profit margin. The gross profit margin of the Company in the first three quarters is 67.63%(year-on-year-12.01pp, the same below). Quarterly, Q3 revenue in 2023 was 518 million yuan (-9.89%), net profit attributable to parent was 134 million yuan (-19.96%), net profit deducted from non-profit was 116 million yuan (-30.29%), gross profit rate was 64.38%(-13.83pp). The company's overseas injection products are constantly enriched, and the production capacity bottleneck is expected to be gradually lifted. New products such as iopamidol, vancomycin, daptomycin and pantoprazole sodium are expected to continue to make efforts.

Expense rate: Gross profit margin short-term pressure, expense rate remains stable. Gross profit margin: Gross profit margin in the first three quarters and Q3 of 2023 was 67.63%(-12.01pp) and 64.38%(-13.83pp) respectively. Cost rate: Sales expense ratio in the first three quarters 13.29%(+0.81pp), overhead rate 6.54%(+0.43pp), financial expense ratio 2.04%(-2.61pp), the decrease in financial expense ratio was mainly due to the capitalization of special loan interest expenses, with the total of three expense ratios of 21.87%(-1.37pp); the sales expense ratio of 2023Q3 was 10.10%(-1.97pp), the management expense ratio was 6.75%(+0.65pp), the financial expense ratio was 2.39%(-2.06pp), and the total of three expense ratios was 19.25%(-3.37pp). R & D investment: R & D expenditure in the first three quarters was 230 million yuan (-11.00%), accounting for 17.00%(-1.84pp) of revenue; R & D expenditure in Q3 2023 was 98.12 million yuan (-21.99%), accounting for 18.94%(-2.94pp) of revenue.

Profit forecast and investment suggestion: We expect the company's revenue from 2023 to 2025 to be CNY 2,079 million, CNY 2,425 million and CNY 2,842 million, with year-on-year growth of 15.1%, 16.7% and 17.2%; net profit attributable to parent company is CNY 4.86 million, CNY 571 million and CNY 674 million, with year-on-year growth rates of 15.5%, 17.5% and 18.1%. The current share price corresponds to 18/15/13 times PE from 2023 to 2025. Considering that the company is a scarce injection exporter in China, it is currently in the rapid growth stage of rapid product approval and overseas domestic dual-line power, and it is worth looking forward to continued rapid growth in the future, so it maintains the "Buy" rating.

Risk prompt events: drug price reduction risk; domestic and foreign product approval does not meet the expected risk; external policy uncertainty risk; public information lag or not updated in a timely manner.