Introduction to this report:

The company announced its performance forecast. The four major business segments have maintained steady growth, and the innovation pipeline is expected to be fulfilled one after another in the future. It is optimistic about the company's long-term innovation and transformation, and maintains an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. The company released a performance forecast. Net profit due to mother in 2023 was 28.12-2,862 billion yuan, up 12.50%-14.50% year on year; net profit after deducting non-return to mother was 2,735-2.784 billion yuan, up 13.50%-15.50% year on year. Net profit due to the fourth quarter increased 20-30% year-on-year, and the performance was in line with expectations; considering the impact of the tightening of the hospital environment, EPS for 2023-2025 was reduced to 1.63/1.93/2.29 yuan (originally 1.68/2.04/2.40 yuan). Referring to comparable company valuations, the company was given PE21X in 2024, the target price was lowered to 40.53 yuan, and the holdings increase rating was maintained.

Steady growth in performance. The company continued to promote innovation and transformation strategies. During the reporting period, all four major business segments achieved positive momentum, and operating efficiency continued to improve. The pharmaceutical industry sector stabilizes the hospital, develops the outside market, and achieves steady growth. The medical and aesthetic sector has achieved rapid growth at home and abroad. Revenue has reached the highest level in history, and the profitability of overseas medical and aesthetic business has gradually increased. The pharmaceutical business sector was affected by the tightening of the hospital environment in Q3, and it is expected that Q4 will be repaired sequentially.

The ongoing research pipeline is expected to be realized one after another. Liraglutide injection for diabetes and weight loss was approved for marketing for the first time in China in March and June 2023. By the end of 2023, it had achieved in-patient sales in 800 major hospitals in China, and completed the coverage of 20,000 single terminal pharmacies. ELAHERE, the world's first ADC drug, and ARCALYST, and QX001S, are expected to be approved for marketing within 2024; mefuatinib will complete phase III research in July 2023; phase III clinical research on simeglutide injection has begun, and the first patient enrollment will be completed in September 2023. The product pipeline is expected to gradually materialize.

Catalysts: Clinical progress has accelerated, industrial and micro business development has exceeded expectations, and demand for medical and aesthetic products has exceeded expectations? Risk warning: Innovative drug development progress and commercialization fall short of expectations, industry rectification risks