The change in the scope of the consolidated statement is due to a decline in apparent performance. In the first three quarters of 2023, the company realized operating income of 1.215 billion yuan, year-on-year-10.51%; net profit of 142 million yuan,-45.27%; and non-return net profit of 122 million yuan, + 69.90% of the same period last year. In terms of Q3 alone, the revenue was 360 million yuan (year-on-year-25.73%), the net profit was 35 million yuan (- 82.02%), and the non-return net profit was 34 million yuan (+ 8.04%). During the reporting period, the company's income and return net profit declined significantly, mainly due to the fact that Baijun Medical was no longer included in the consolidated statement and the large investment income resulting from the disposal of Baijun Medical equity in the same period last year.

The revenue of the pharmaceutical manufacturing industry increased by 3.44%. During the reporting period, the company's pharmaceutical manufacturing revenue increased by 3.44%, mainly due to the increase in income from key products such as Qiangli loquat paste (honey refining), Qiangli loquat dew, Pudi blue anti-inflammatory tablets, montmorillonite powder and other key products. Xuan Qi Jiangu tablet, an innovative traditional Chinese medicine, has covered more than 500 public medical institutions, and its cumulative income has exceeded 19 million yuan. According to the classification, the income of respiratory system drug products was + 65.52%, mainly due to the good sales of Qiangli loquat ointment (honey refining) and Qiangli loquat dew; the income of children's medicine series was + 32.42%, mainly montmorillonite powder and lysine vitamin B12 granules; the income from cardiovascular and cerebrovascular diseases was-21.04%, which was mainly caused by the decline of sales price. Other categories of income-41.10%, mainly because Hengxing Technology in April 2022 and Baijun Medical in October 2022 are no longer included in the scope of merger.

In terms of research and development, the China News showed that the innovative traditional Chinese medicine Nuolitong granule developed by the company is currently under market license review; the owner of the granule vitamin C effervescent granule has passed the drug GMP compliance test.

Fine management and control sales costs are reduced. In the first three quarters of 2023, the company's gross sales margin was 69.13% and net sales margin was 11.57%, which was + 2.00pct and-6.18pct respectively compared with the same period last year. In terms of expenses, the rates of sales, management, finance and R & D expenses during the reporting period were 41.57%, 13.69%, 0.62% and 4.71%, respectively, compared with the same period last year-4.86pct, + 1.83pct,-2.47pct, + 1.16pct. The company has increased cost control and fine marketing efforts, and with the help of gradually mature and stable sales channels and sales personnel, further expand the sales scale, so as to reduce sales expenses.

[investment advice]

The company is committed to building a health industry group with innovative traditional Chinese medicine as the core, seizing the strategic highland of innovative traditional Chinese medicine, and building the basis for long-term survival and development in the future. We maintain the company's operating income of $1.811 million, $2.385 billion, net profit of $1.85 million, $2.36 billion, and EPS of $0.42, 0.54 and 0.69 respectively in 2025, respectively, with a "overweight" rating corresponding to PE of 24-19-15.

[risk Tip]

Risk of policy change

Market competition intensifies

Merger and acquisition integration risk

Product quality and safety

Risk of new product research and development