The company is a comprehensive pharmaceutical company on the eve of innovation and implementation. The company started with proton pump inhibitor (PPI) injections and is a leading company in this field. In 2019-2022, the company's performance declined due to collection. Rebound from bottom in 2023: On the one hand, sales of collected varieties recovered, and the impact of collection gradually weakened; on the other hand, the company rapidly promoted the launch of new generic drugs and optimized the product structure, bringing new growth points to the stock business. More importantly, the company actively promotes innovation and transformation, and invests heavily in innovative drug research and development, including focusing on laying out innovative oncology drugs, introducing high-quality overseas pipelines, and building a world-leading technology platform.

The R&D pipeline has gradually been implemented, ushering in a stage of rapid development of innovation and transformation. First, the three core products are about to be launched or are entering critical clinical trials, and are about to enter the commercial verification stage: 1) Claudin18.2 has entered phase III clinical trials, the R&D progress is in the top three in the world, and the curative efficacy compared to the same target drugs is outstanding (objective remission rate ORR 80%, disease control rate DCR 100%); 2) The third-generation EGFR-TKI marketing application was accepted by CDE in November 2021. Currently in the supplementary materials queue, it is expected that they will be approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing in China; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently being approved for marketing within the year; 3) Maltol iron capsules are currently in progress three The phase bridging test is expected to submit an NDA within the year. It is the only novel oral iron agent that has been approved for standardized clinical marketing in the international market in recent years. Second, two products, the IL-2 anti-tumor drug and VEGF/ANG2 ophthalmic dual antibody, have been authorized externally, and their R&D capabilities have been recognized internationally. Furthermore, other pipelines are progressing in an orderly manner, and VEGF/ANG2 and c-Met inhibitors are expected to enter phase II clinical trials within the year, and IL-15 products have great potential value.

The collection and extraction were cleared, and the stock business bottomed out and rebounded. On the one hand, the impact of historical harvesting has basically been eliminated: sales of the 6 varieties selected in the fifth batch have reached an inflection point, and the negative impact has been reduced; the 4 varieties selected in the seventh batch have increased slightly, and the impact of collecting the large single product omeprazole sodium that was not selected has weakened; on the other hand, since 2021, the first and imitation new products have been launched one after another, forming an echelon relay. It is expected that there will still be multiple reserve varieties on the market in 2024. As a result, the company's performance is expected to improve to a large extent this year and return to the fast track of development.

We predict that the company's net profit for 2023-2025 will be -156, 0.12, and 74 billion yuan, respectively. We have made an absolute valuation of the company's free cash flow. The reasonable market value of the company is 10.448 billion yuan, and the corresponding target price is 11.26 yuan. For the first time, we have given a “buy” rating.

Risk warning

Innovative drug research and development progress falls short of expectations, generic drug types entering collection or collection exceeding expectations, increasing product competition or falling short of expectations, risk that the company's medium- to long-term profitability will decline, etc.