Brief comment on performance

In the evening of October 27th, the company disclosed its results in the third quarter of 2023. In the first three quarters, the company realized operating income of 672 million yuan (+ 16.22%), net profit of 225 million yuan (+ 27.25%) and non-net profit of 212 million yuan (+ 28.62%). In the third quarter, the income was 203 million yuan (+ 3.25%), the net profit was 65 million yuan (+ 20.51%), and the non-net profit was 59 million yuan (+ 23.58%).

Business analysis

The selection revolves around "high-tech difficulty" and "time window". The gross profit margin of 23Q1-Q3 and 23Q3 is 57.67% (+ 7.02pp) and 56.92% (+ 7.16pp). We expect it to be mainly due to the excellent competition pattern of the company's products, the improvement of production efficiency brought about by technological reform and the release of new varieties such as sodium gluconate. The company has strong competitiveness in entecavir, bicyclol, posaconazole, sitafloxacin, nebirol, non-butane and other products. At present, its business has expanded to the standard markets such as the United States, Europe and Japan, and has established long-term strategic cooperative relations with many famous international enterprises. At the same time, the production capacity construction of the company's characteristic API and key intermediates has been continuously promoted, and the first and second phases of the construction project of the production base of characteristic API and key pharmaceutical intermediates can contribute 1.048 billion yuan.

Continue to increase R & D investment to build a strong competitive advantage: in the first half of the year, the company spent 74 million yuan (+ 40%) on R & D, and continued to increase R & D investment in API, preparations and other fields. The company cooperates fully with well-known universities and research institutions at home and abroad, gives full play to the advantages of contract customization and cooperative R & D mode, and adheres to the independent R & D path of introduction, digestion and innovation. In terms of innovative drugs, the company's innovative drug Brozo sodium spray Ⅱ phase clinical has been over, is about to enter the Ⅲ phase clinical, is expected to bring new growth points.

Focus on the volume of preparation business: in 2021, the company launched a long-term and comprehensive cooperation with STADA, the world's leading generic drug company, on the joint development and global marketing of chemical generic drug products, covering 65 overseas countries. With the continuous development of the company's research and development, we are optimistic about the volume of the follow-up company's preparation business.

Earnings forecast, valuation and rating

We are optimistic that the company's basic API and CDMO forecast that the company's 2023-2025 return net profit will be 3.01 USD 3.97 / 533 million, corresponding to PE 3.97 times that of 25-19-14, respectively, maintaining a "buy" rating.

Risk hint

RMB exchange rate fluctuations; R & D progress is not as expected; major shareholders reduce their holdings; restricted shares are lifted.