Revenue for the whole year was in line with expectations, and marketing expenses continued to be effectively controlled: revenue and basic profit in 2023 were +1.7%/+2.8% (YoY, same below) to RMB 31.45 billion/RMB 6.28 billion, and revenue was in line with our and market expectations. 4Q23 revenue and basic profit were +1.9%/+5.3%, respectively. By business segment: Pharmaceutical business +4.6% (4Q23 +6.6%). APIs, functional foods, and other businesses were affected by falling product prices; antibiotic raw materials recorded a rapid increase of +13.9%, thanks to increased sales of products such as azithromycin. Revenue from various treatment fields/main products in the proprietary pharmaceutical business is as follows: neurology +12.1%, cancer -16.4%, anti-infective +19.7%; Enbipu and Jin Youli grew in double digits, domicine remained flat, and declined by about 70% after the contract was renewed. 4Q23 tumor line revenue returned to positive growth of +2.7%, and neural line +3.2%. The annual gross margin decreased by 1.4 ppts to 70.5%, mainly due to changes in the product sales structure and the decline in VC prices; however, benefiting from effective control of sales expenses, the operating profit margin increased by 0.5 ppts.

2024 guides double-digit growth, and the smooth entry of new products into hospitals: The company maintained a double-digit revenue and net profit growth rate in 2024. Among them, the total net sales of new products and sub-new products on the hospital side exceeded 3 billion yuan (revenue confirmed on the reporting side was about 3.5 billion yuan), and the future interest rate remained above 30%. There was positive progress in market entry in 1Q24. New varieties such as mefurex and glutametinib quickly entered the hospital after the national negotiations; in January-January, the company's pharmaceuticals entered about 1,600 hospitals, and continued to accelerate in March, and are expected to reach 2,700 by the end of the month. The company expects these developments to drive 2Q24 product sales volume. In terms of APIs, VC prices have bottomed out and rebounded. Although caffeine prices have declined steadily and slightly, the company's market share continues to increase.

It is expected that more than 50 new products/new indications will be approved within 5 years, and the focus can be on in 2024-26:1) amphotericin B liposomes and iritecan liposomes are expected to be approved in the US in 2024; 2) ADC (HER2 and Claudin 18.2) pipeline varieties will be launched for the first time, and the development of an IO+ADC combination scheme is expected. It is expected that PD-1 + Nectin-4/PD-1 + EGFR combination program development will be launched in mid/2H24, respectively; 3) In the field of weight reduction/sugar reduction, simeptide is expected to be approved in the US The new GLP-1 drug TG103 is expected to be marketed in 2026, and about 4 new molecules (oral administration, long-term injections, etc.) are expected to enter clinical trials this year.

Maintaining the buying rating: We adjusted the company's non-operating income forecast based on full-year results, and the 2024/25E net profit forecast was lowered by 3%/4%, respectively. We maintain our buy rating and target price of HK$10.0. The company is at a critical turning point where the impact of collection has been clarified, R&D platforms have been verified, and many innovative technologies are about to enter an explosion period. The current valuation is very attractive.