Recommended logic: 1) The goal of eliminating hepatitis C in 2030 will accelerate the discovery of existing patients, and the expansion of Kailiwei's health insurance reimbursement will accelerate expansion. In March 2023, Kailliwei's health insurance indications were expanded to achieve full coverage of major domestic genotypes. Health insurance expansion+high-incidence segmentation marketing strategies helped Kailiwei exceed expectations; 2) The multi-pipeline layout is slow to exceed expectations; 2) The multi-pipeline layout is slow, and the long-term interferon-derived probiotic phase III data is yet to be read. The company has many hepatitis B indications in KW-027, KW-040, etc. in the research pipeline. The long-term interferon-based prebiotic phase III clinical trial has entered the data readout stage, and the competitive pattern is good; 3) The product echelon layout is reasonable, and mature varieties have built a stable basic market. Interferon harvesting in Jiangxi is progressing moderately, and Jin Shuxi expects the market share to be maintained; Kane Probiotic's domestic market share is leading; the influence of coposide series harvesting is weakening marginally; and Ambrose has a good short-term pattern and is in a rapid release period.

Hepatitis C cure: A huge stock of hepatitis C patients has yet to be discovered, and Kailiwei's medical insurance reimbursement expansion accelerates expansion. In 2021, the National Health Commission issued a work plan to eliminate hepatitis C, which aims to eliminate hepatitis C by 2030, forcing the screening of existing patients to be accelerated. In December 2020, treatment of non-1b hepatitis C indications was included in medical insurance reimbursement, and in March 2023, Kailliwei's medical insurance indications were extended to “gene type 1, 2, 3, and 6”, covering major domestic genotypes.

With the expansion of the scope of reimbursement and the company's promotion strategy around grade hospitals and high-incidence counties, Kailiwei's volume exceeded expectations and achieved revenue of about 130 million yuan (+133%) in 2022.

Hepatitis B cure: Probiotic phase III data will soon be read out to enrich the product matrix to improve the hepatitis B cure rate. The company's long-term interferon product, a probiotic treatment with low-replication chronic HBV infection phase III clinical administration was completed for 48 weeks at 23H1. Follow-up was completed as planned at the end of 2023, and the current competitive pattern is relatively good; in addition, the company reserves multiple slow B products such as KW-027 (hepatitis B monoclonal antibody) and KW-040 (small nucleic acid siRNA) in the research pipeline to create a functional hepatitis B cure product matrix.

The product echelon layout is reasonable, and mature varieties build a stable basic market. In addition to drugs to treat hepatitis C and hepatitis B, the company also has a variety of commercial products, including Jin Shuxi (human interferon α2b vaginal effervescent tablets), Kain Probiotics (human interferon α2b injection), Amboz (pirfenidone tablets), Kane Ganle (compound glycyrrhizide capsules), and Ganyu (compound glycyrrhizide tablets/injections), etc., mature products such as Jin Shuxi and Kane Probiotics lead the market share; Jin Shuxi is expected to slowly collect and land interferon in Jiangxi. Maintain the current share; Ambrose has a good competitive pattern and is in the rapid expansion phase. The company's product echelon layout is reasonable and continues to contribute to steady cash flow.

Profit forecast and investment advice: The company's net profit due to mother in 2023-2025 is estimated to be 1.2/16/230 million yuan, respectively, and EPS is 0.68/0.92/1.36 yuan, respectively. Considering that the company's hepatitis C products have entered the rapid release stage, that data is about to be read out for hepatitis B products, and that mature varieties are building a stable basic market, it is expected that the future will bring great flexibility in performance, so it is recommended that active attention be paid.

Risk warning: Risk of product development falling short of expectations, risk of market competition increasing risk, risk of product commercialization falling short of expectations, risk of price reduction in collection, etc.