The company released the third quarterly report of 2023: in the first three quarters, it realized revenue of RMB 3.037 billion yuan (yoy-42%), net profit of parent company of RMB 452 million yuan (yoy-71%), and net profit of deduction of non-parent company of RMB 425 million yuan (yoy-73%). Among them, single Q3 realized revenue of 698 million yuan (yoy-46%), net profit of 41 million yuan (yoy-89%), net profit of 34 million yuan (yoy-91%) deducted from non-parent.

Small molecule API CDMO business realized revenue of 2.942 billion yuan (yoy-43%), and all major orders have been delivered. 1) API products: The company continued to promote product upgrading from intermediates to APIs, serving 144 API products, an increase of 17 year-on-year;API products realized revenue of 393 million yuan (yoy+31%); 11 process validation projects were completed and 13 projects were under implementation;2) Customers:

About 300 customers were served, including 77 new customers; 592 orders were signed (yoy+32%); 448 projects were delivered (yoy+35%).

The new business continued to be promoted, reducing the net profit of the consolidated statement of the company by RMB 142 million yuan in total, and the net profit of the consolidated statement of the strategic layout of the joint-stock companies decreased by about RMB 17 million yuan in total.

The revenue of CDMO business of preparation was 61.19 million yuan (yoy+237%): 80 customers were served, 119 service projects were served, and new orders signed were 144 million yuan (yoy+211%), of which new orders signed in Q3 were 63 million yuan.

Cell and gene therapy CDMO business realized revenue of 31.53 million yuan (yoy+85%): 44 new customers, 64 new projects, new orders of about 58 million yuan (yoy-46%); in addition, the company signed the first cell therapy clinical project order, achieving "zero breakthrough" in clinical projects.

Synthetic macromolecule CDMO business realized revenue of 1.96 million yuan: serving 9 customers.

Short-term pressure on profitability: the overall gross profit margin in the first three quarters was 46%, down 6.56pct year-on-year, and the net interest rate was 11.93%, down 16.96pct year-on-year. The decline was mainly due to the decrease in major orders, the increase in staff size and the operation of some new R & D centers and production bases.

Continue to promote global layout: 1) Biomacromolecules: antibody and ADC R & D center in Shanghai Waigaoqiao was put into operation (building area of about 7, 000m2), GMP production workshop for bulk solution and preparation is expected to be put into operation in Q4;2) API preparation integration: new crystallization and preparation R & D site in New Jersey, USA was put into operation (building area of nearly 4, 000m2), and the construction of R & D and production base in Slovenia was accelerated.

Maintain "overweight" investment rating. The global investment and financing environment has shown certain signs of warming up, offline communication with overseas customers has gradually recovered, new capacity construction of the Company will be gradually implemented in the future and new production capacity will be put into use for six times, which is expected to provide long-term momentum for the Company. We estimate that the net profit of the company from 2023 to 2025 will be 5.4/3.9/600 million yuan respectively, and the corresponding PE will be 29/40/26 times respectively, maintaining the rating of "overweight".

Risk hints: exchange rate fluctuations, new business expansion is not as expected, geopolitics and other risks.