New Novus: The transformation group innovates a variety carrier, starting a new journey of development; the first coverage gave “the purchase” of New Novell, which was mainly engaged in the manufacture of caffeine in the early days of its establishment, but continued to improve its layout in the health field through the acquisition of a subsidiary of the parent company Shijiyao Group (1093 HK) in the 2016-2022 period. The main products in the endogenous business include caffeine, acarbose raw materials, anhydrous glucose, and GuoWeikang. In August 2023, New Novus announced that it plans to acquire Jushi Biotech, which is also a subsidiary of CSPC Group, through a cash capital increase, officially launching the first step in the innovation and transformation of New Novi. Considering that New Novell's endogenics business has the highest market share and that the market price of caffeine/acarbose raw materials has stabilized, we are optimistic that the company will achieve net profit of 8.19/9.39/1,094 million yuan (corresponding to EPS of 0.70/0.80/0.93 yuan) in 2023-2025, and give the company 58 times PE in 24 years (considering the company's leading attributes and the scarcity of Jushi Biotech's mRNA platform, the target price is 46.40 yuan compared to comparable company Wind's 2024 consensus forecast of 52 times). First coverage, giving a “buy” rating.

Dushi Biotech: A scarce domestic mRNA+ADC technology platform, starting the first step in innovation and transformation, Jushi Biotech's major platforms include: 1) mRNA platform: It is currently a scarce platform for commercializing products. Clinical data still highlights excellent safety, protection and stability compared to overseas BioNTech products.

Furthermore, vaccine varieties with broad market space, such as rabies, respiratory syncytial virus, shingles, and HPV treatment vaccines, will be deployed later. 2) ADC platform: HER2 ADC is expected to be launched in the second tier of domestic production. Nectin4 and Claudin18.2 were successfully authorized overseas (initial verification of excellent phase 1 clinical data). EGFR ADC is the company's first camptothecin ADC (we are optimistic that it has overseas BD potential). 3) Monoclonal antibody platform: PD-1 and omalizumab will soon be commercialized in 2024, and the R&D pipeline is rich.

Endogenous business: leader in the specialty APIs segment, leading the health products business in China. We expect the company's endogenous business to achieve 15% net profit CAGR in 2023-2025, considering the following commonalities in the API and functional food business layout: 1) Preferred industries in the functional ingredients sector have high entry barriers and excellent competitive patterns (such as caffeine, anhydrous glucose); 2) Stable terminal demand (such as rigid consumption of functional beverages, chronic disease treatment demand, etc.); 3) Steady and steady development into an industry leader (domestic caffeine production capacity share in 2022 50% +, A The domestic sales scale of vitamin C tablets, the raw material for carbohydrate, is the largest, with a market share of 39% of the domestic production capacity of acarbose).

It completed the commercial transformation and changed its name to “Shijiao Innovation”. The parent company's eight major R&D platforms, Xinnovo, completed the commercial and commercial change in November 2023, and officially changed its name to “Shiyao Innovative Pharmaceutical Co., Ltd.” to further embark on a journey of innovation. We believe that the merger and acquisition of Jushi Biotech is an important test for the parent company Shiyao Group to lay out innovative A-share assets, and that Shiyao Group has 8 major R&D platforms (including leading domestic nanoparticles, siRNA, macromolecule platforms, etc.). Not only has it entered an intensive innovation implementation period (57 new products/indications were approved within 23-28 years of the Group Guidelines), but it is also rich in mid/early stage pipelines. Furthermore, we are also optimistic that Shiyao Group's high-quality commercialization team will enable Jushi Biotech to launch innovative products after launch.

Risk warning: Caffeine price fluctuation risk, acarbose terminal demand risk, Jushi pipeline R&D risk, risk related to commercialization of innovative drug sector, innovation asset injection falling short of expectations.