Event: 23 the company achieved revenue of 581 million in the first three quarters, an increase of 1.34% over the same period last year, a net profit of 142 million, an increase of 11.53%, and a deduction of 131 million of non-profit, an increase of 9.92% over the same period last year. 23Q3 achieved revenue of 176 million, down 11.40% from the same period last year; net profit from home was 33 million, down 33.94% from the same period last year; and 30 million non-profit, down 34.23% from the same period last year.

With the upgrading of stomach production, the performance is under short-term pressure, and there is great potential for the use of drugs by both sexes. The company achieved revenue of about 135 million in the first three quarters (+ 34% compared with the same period last year). Due to the suspension of production in September due to the upgrading of the production line in Thailand, the sales revenue in the third quarter was not as expected. The transformation of the production line in Thailand has been basically completed, so far it has been successfully produced and supplied, and the follow-up sales revenue is expected to maintain rapid growth. At the same time, the transformation of Hewei Zhengchang pills to domestic independent production is being actively promoted, and it is expected to become a well-known brand in the field of acute gastrointestinal drugs in China in the future; the income of bisexual drugs in the first three quarters will be 200 million (year-on-year + 19%), with the improvement of the consumer environment. It is expected to continue to release volume, and the market potential is huge.

Continue to increase investment in research and development, medium-and long-term layout can be expected in the future. The company continues to increase its R & D investment, which reached 62 million yuan in the first three quarters of this year, an increase of 85.8% over the same period last year. The innovative drug CKBA ointment was successfully approved for phase II clinical trial of vitiligo indications in July this year, and the clinical trial is progressing smoothly. In the field of aging-related andrology, sildenafil oral disintegrating tablets were accepted by the State Drug Administration in March this year. Finasteride tarafel capsules for the treatment of male benign prostatic hyperplasia are expected to apply for NDA at the end of this year, and minoxidil topical solution for hair loss is expected to apply for NDA by the end of this year. At present, the project of pilocarpine hydrochloride eye drops for adult presbyopia has basically completed the relevant preclinical work, and the application for clinical trials will be submitted to the National Drug examination Center as soon as the relevant application data are complete.

Profit forecast and valuation suggestion: the company delves deeply into the market of sexual health and chronic disease, and the acquisition and stomach bowel pill technology is expected to increase the production capacity of related products and enhance the company's profitability. The company is rich in research pipelines, and CKBA and other drugs under research are expected to open up long-term growth space. Due to the short-term impact of capacity upgrading, the profit forecast has been lowered, and the company's net profit from 2023 to 2025 is expected to be 2.2 million, 3.2 billion and 4.2 billion yuan respectively. Maintain a "buy" rating.

Risk hints: new drug listing progress and post-market performance is not as expected; agency business risk; market competition aggravates risk.