The company released the third quarterly report of 2023: in the first three quarters of 2023, the company realized revenue of 5.18 billion yuan, an increase of 15.51% over the same period last year, and a net profit of 620 million yuan, an increase of 171.8% over the same period last year, deducting 510 million yuan of non-return net profit, an increase of 15.2% over the same period last year. Q3 realized revenue of 1.42 billion yuan, an increase of 0.88% over the same period last year, a decrease of 13.11% from the previous month, a net profit of 110 million yuan, an increase of 532.29% over the same period last year, a decrease of 53.82% from a month earlier, and a net profit of 90 million yuan from a year earlier, down 27.35% from a year earlier and 37.59% from a month earlier. The performance fell into the median forecast.

The main business performance of traditional Chinese medicine health is sound, and the impact of non-recurrent profit and loss is weakened. In the first three quarters, the company adhered to the strategic layout of giving priority to the great health of traditional Chinese medicine, with characteristic chemical medicine and characteristic prescription traditional Chinese medicine as the two wings. The revenue of the business of traditional Chinese medicine health products reached 3.442 billion yuan, an increase of 23% over the same period last year, accounting for 66.40% of the company's revenue, which improved 4.29pct over the same period last year, and the company's business structure continued to be optimized. Affected by the changes in the market value of Hong Kong stock Jiahe biological shares, the company's non-recurrent profit and loss increased by 159 million yuan compared with the same period last year. Coupled with the transfer of 7.84% shares in May, the net profit of returning home in the first three quarters increased significantly compared with the same period last year.

The performance of OTC and health consumer goods is outstanding, and prescription drugs are under short-term pressure under the influence of hospital policies. In the first three quarters, the revenue of the over-the-counter drug business reached 1.91 billion yuan, an increase of 24.09% over the same period last year. Changyanning series earned 1.1 billion yuan through increased brand promotion, brand co-building with chain drugstores and scene marketing, more than the whole of last year. The revenue of the health consumer goods business reached 430 million yuan, an increase of 21.91% over the same period last year. The sales income of Kangnbe brand health food exceeded 400 million yuan, and continued to maintain rapid growth through the expansion of new categories and the layout of new channels. The revenue of the prescription drug business reached 1.622 billion yuan, an increase of 5.71% over the same period last year, which was lower than that in the first half of the year, mainly due to policies such as Q3 hospital compliance, but acetylcysteine effervescent tablets and galantamine hydrobromide tablets still achieved good growth by virtue of their advantages in quality and efficacy. The revenue of the prepared slices of traditional Chinese medicine business reached 540 million yuan, an increase of 37.75% over the same period last year, maintaining the high growth trend in the first half of the year. After the merger and acquisition of the prepared slices company of the University of traditional Chinese Medicine, the number of new hospitals increased steadily.

In the research and development of pipeline steady progress, the product matrix continues to enrich. In September, the registration of the company's 2.1 new drugs clear throat and pharynx tablets was accepted by CDE, which further enriches the category of throat drugs used by the company, which is conducive to focusing on the major health of traditional Chinese medicine. By 2023, H1 company is in research projects totaling more than 180 items, more than 20 innovative projects, innovative products have been listed on the market to provide protection for the company's long-term development.

Maintain the "highly recommended" investment rating. We are optimistic that the company will focus on the development potential of the major health industry, improve quality and efficiency, and steadily improve its profitability through endogenous and extension, so as to achieve the strategic goal of the "1188-year Plan". It is estimated that the net profit of homing from 2023 to 2025 will be 7.05 million yuan, an increase of 96.9%, 18.9% and 15.5% over the same period last year, corresponding to PE19/16/14 times, and maintain the "highly recommended" investment rating.

Risk tips: market and policy risks, collection and acquisition price reduction, R & D failure, raw material price increase risk and so on.