The net profit of home ownership maintained a good growth. In the first three quarters of 2023, the company achieved operating income of 1.465 billion yuan, + 8.97% year-on-year, and net profit of 287 million yuan, an increase of 42.08% over the same period last year. In the Q3 quarter alone, the company achieved revenue of 453 million yuan, + 0.90% year-on-year, and net profit of 89 million yuan, + 29.14% year-on-year. Among them, the sales revenue of Wuling series is 930 million yuan, + 8.73% compared with the same period last year; the sales income of formula granules is 28 million yuan,-46.13% compared with the same period last year, and the formula granules are still in the filing stage of national and provincial standards; and the sales revenue of Bering film is 142 million yuan, which is-27.16% compared with the same period last year. This is mainly due to the fact that the Bering film 2022Q2 has been successively failed by Hubei Alliance Collection.

The work of innovation and research and development has been carried out in an orderly manner. In recent years, the company continues to expand the new clinical application of Wuling capsule, and has been recommended by 59 clinical guidelines, clinical pathways, monographs and expert consensus; on the other hand, it continues to carry out secondary development around Wuling capsule, mainly focusing on the treatment of Wuling capsule in the field of Alzheimer's disease (AD). At present, the company is carrying out real-world clinical research; expanded clinical application research after the listing of Lingze tablets; actively participating in the research and formulation of national and provincial standards for formula granules; IBS-D registration clinical study of polycarbo non-calcium tablets; innovative traditional Chinese medicine LXP, which is composed of Chinese medicine masters, has completed pharmacology and pharmacology research work, and is waiting for long-term toxicity research results. In addition, bailing capsule according to the same name of the same prescription, has completed all the pre-listing research work, the listing application has been accepted.

Cost control is good and profitability is improved. In the first three quarters of 2023, the company's sales, management, finance and R & D expenditure rates were 40.82%, 8.58%,-0.77% and 3.97%, respectively, compared with the same period last year-5.69pct,-0.54pct,-1.14pct, + 0.22pct. During the reporting period, the gross profit margin and net sales profit margin were 68.65% and 19.97% respectively, compared with the same period last year-2.70pct and + 4.01pct respectively.

[investment advice]

The company revolves around the Wuling fungus powder extension development series product strategy, constructs the product line with independent intellectual property rights, Wuling capsule, Lingze tablet, Linglianhua granule are all exclusive products. In April 2023, the China over-the-counter Drug Association released the "2022 China over-the-counter Drug Enterprises and products list". The company ranked TOP36 among Chinese over-the-counter drug manufacturers in 2022. Wuling capsule, the company's core product, ranked second in the category of proprietary Chinese medicine-headache and insomnia, and Bering tablets ranked sixth in the category of proprietary Chinese medicine-tonifying. As of the first half of the year, the company has completed 316 provincial standards for the record of traditional Chinese medicine formula granules. As the company's performance growth was slightly lower than expected, we lowered the growth rate of Wuling series products and bailing tablets, and slightly lowered the company's 2023Universe 2024Unix 2025 operating income to RMB20.2489max. The net profit of the company returned to its mother was RMB551 million, the EPS was 0.54 PE, and the corresponding PE was as much as 18-15-12. Maintain the "overweight" rating.

[risk Tip]

Risk of industry policy change

Product quality and safety risk

Risk of failure in drug research and development

Goodwill impairment risk