The company released its semi-annual report for 2023: the operating income in the first three quarters was 672 million yuan, an increase of 16.22% over the same period last year; the net profit was 225 million yuan, an increase of 27.25% over the same period last year; and the non-return net profit was 212 million yuan, an increase of 28.62% over the same period last year. Of this total, the income in the third quarter was 203 million yuan, an increase of 3.25% over the same period last year; the net profit was 65 million yuan, an increase of 20.51% over the same period last year; and the non-return net profit was 59 million yuan, an increase of 23.58% over the same period last year.

3Q23 continues the trend of rapid growth, the profit margin is stable at a high level, and the expense rate is well controlled.

2023Q1-Q3, gross profit margin is 58.89% (yoy+3.25pct), 56.87% (yoy+11.03pct), 56.92% (yoy+7.16pct) respectively, and net profit rate is 35.68% (yoy+1.20pct), 32.27% (yoy+2.60pct), 32.10% (yoy+4.60pct) respectively. Expense rate: the 3Q23 sales expense rate is 1.10% (yoy-2.73pct), the management expense rate is 9.17% (yoy-8.46pct), the R & D expense rate is 12.70% (yoy-0.58pct), and the financial expense rate is-0.83% (yoy+10.20pct). The slight increase in the financial expense rate is expected to be due to the decrease in exchange gains and losses.

Characteristic API and intermediates: the construction of production capacity is promoted, and the production capacity gradually breaks through the bottleneck. In terms of production capacity construction, the construction of seven workshops has been completed in the first half of the year, of which 1 workshop has completed completion acceptance, 3 workshops are carrying out trial production, 1 workshop has completed equipment installation, and 2 workshops are waiting for equipment installation. With the production capacity has been put into production, the company's main product capacity is expected to gradually break through the bottleneck and further increase the market share.

CRO/CDMO/CMO: a large number of projects, to be a deep customer, actively open up new customers. 1H23 has a total of 26 ongoing projects (15 CRO/CDMO projects and 11 CMO projects), including 13 clinical projects and 13 commercial projects. The company continues to cultivate large pharmaceutical enterprises around the world, has a strong relationship with major customers, and actively develops new business of innovative R & D pharmaceutical companies, with a steady increase in the total number of customers and continuous optimization of customer structure.

Preparation: the internationalization of preparation is advancing steadily. In terms of imitation pharmaceuticals, the relevant production lines of Qizheng Pharmaceutical, a wholly-owned subsidiary, have passed the GMP inspection and continue to promote the "internationalization project of high-end preparations". High active preparation workshop and oral solid preparation room have completed plant construction and equipment installation. The company's process of continuously promoting the internationalization of generic drugs through its strategic partner STADA, a German pharmaceutical company, is expected to be gradually landed in the future. In terms of innovative drugs, equal emphasis is placed on investment, development and introduction, and good coordination is formed between investment new drug companies and other businesses. The Ⅱ phase clinical trial of Brozo sodium spray has been completed and is expected to enter the Ⅲ phase this year.

Maintain the "highly recommended" investment rating. The company maintains a high profit level, and the preparation is expected to open more room for growth in the future. It is estimated that the company's 23-25 net profit will be 3.0 pound 370.47 billion yuan, corresponding to PE28/23/18X, maintaining a "highly recommended" rating.

Risk tips: research and development progress is not as expected, safety and environmental protection, major customer dependence, exchange rate fluctuations and other risks.