Event: in the third quarter of 23, the company achieved revenue of 269 million yuan, an increase of 24.40% over the same period last year, a net profit of 56 million yuan, a substantial increase of 157.69% over the same period last year, and a net profit of 53 million yuan, a substantial increase of 146.44% over the same period last year. The company's revenue and profit end recovered significantly, mainly due to Su Ling's accelerated volume.

"Su Ling" continues to expand its volume and enter the pet track. Thanks to the lifting of Su Ling's medical insurance restrictions, the growth rate of Su Ling's demand is high. The company seizes the opportunity to deliver drug advantages, activate the sinking market, and promote the rising coverage of Suling terminals.

At the same time, aim at the pet economy, expand Su Ling from human use to dog use, the future increment can be expected. We believe that with the expansion of Su Ling's application, its sales are expected to continue to grow steadily and become the main source of the company's performance growth.

High R & D helps the company to transform and upgrade, and a number of projects under research are promoted in an active and orderly manner. The company invested 67 million in R & D in the first three quarters of 2023, an increase of 21.82% over the same period last year. KC1036, Jincao tablet and Agkistrodon acutus haemagglutinin for dog injection are progressing smoothly. KC1036 is carrying out phase Ⅱ clinical studies in an orderly manner. More than 100 patients with advanced solid tumors have been included in many clinical trials, and the clinical effect is significant in a variety of solid tumors such as esophageal cancer and thymic cancer.

At the same time, KC1036's clinical trials of drugs for children have also been accepted. In addition, the company has made steady progress in a number of new drug research and innovation pipelines: the Ⅲ phase clinical trial of Jincao tablets, a proprietary Chinese medicine, was carried out smoothly and all subjects were enrolled in the group; applications for registration of new drugs for dog injection of Agkistrodon acutus hemagglutinin were accepted. We believe that the smooth progress of a number of reserve drug R & D pipelines will become a new growth point for the company, and the company will actively change to an innovative pharmaceutical company with broad room for future performance growth.

The equity incentive scheme has been granted and registered for the first time, and the enthusiasm of employees has been boosted. The equity incentive plan awarded the actual number of restricted shares to 21 incentive targets for the first time, accounting for 1.56% of the total share capital of the company at the time of the grant, and the price was 17.03 yuan per share for the first time. The company takes the growth rate of operating income and net profit of each year from 2023 to 2025 as the performance evaluation target of equity incentive. We believe that the implementation of this equity incentive has greatly promoted the enthusiasm of employees, stabilized the core force of the company, and firmly promoted the sustainable development of the company in the future.

We maintain that the company's earnings per share from 2023 to 2025 are 0.93, 0.09 and 1.34 yuan respectively. According to the valuation level of the comparable company, the company will be valued at 47 times in 2023, with a buy rating corresponding to the target price of 43.71 yuan.

Risk hint

It is mainly the market competition risk of the products being sold, the risk that the progress of innovative drug research and development is less than expected, the risk that the change of assumptions affects the calculation results, the policy risk of the pharmaceutical industry, and so on.