Big Infusion had a high growth rate and formulation revenue stabilized. The target price was 25.74 yuan. The rating was adjusted to “buy” China Resources Shuanghe achieved revenue of 10.22 billion yuan in 2023 (+6.2% yoy, after restatement), and net profit of 1.33 billion yuan (+13.0% yoy, after restatement). The profit growth rate was in line with our previous expectations of over 10%, mainly due to:

1) Strong 1Q/4Q demand in the large infusion sector; 2) The chronic disease sector was slightly hampered by collection, and revenue stabilized due to new specialty products. Looking ahead to 24 years, considering the optimization of the structure of infusion products+non-standard market expansion in the chronic disease/specialty sector+rapid release of new products after collection, we are optimistic about the company's double-digit year-on-year profit growth in 2024. We expect the company's EPS for 2024-2026 to be 1.43/1.60/1.76 yuan, giving it 18 times PE in 2024 (considering the end of the company's collection risk+subsequent integration into new treatment fields, compared to the company Wind's consensus expectation of 17 times the average PE value for 24 years), and the target price is 25.74 yuan, and the rating will be upgraded to “buy”.

Infusion sector: Primary diagnosis, treatment and repair drive steady growth in performance. Optimistic for new product climbing to provide new growth points, the company's infusion sector's revenue in 2023 was 3.18 billion yuan (+22.3% yoy). The main reasons: 1) basic infusions were affected by the external environment and grew rapidly (revenue +32% yoy); 2) BFS/upright soft bags accelerated the replacement and market introduction of low-end packaging materials. Looking ahead to 24 years, we are optimistic that the revenue of the infusion sector will increase by more than 5% year-on-year under a high base. The main reasons are: 1) the company continues to expand and consolidate large infusion production capacity, and the volume increase is steady; 2) the company's nutritional and therapeutic infusions are expected to continue to increase (we estimate that they account for more than 20% of revenue in 23 years); 3) key varieties such as ambroxol and pediatric amino acids will grow steadily, and launch new products (propofol medium and long chain fat emulsion, moxifloxacin hydrochloride injection, levofloxacin sodium chloride injection, etc.) or drive revenue growth.

Non-infusion sector: Revenue from the chronic disease/specialty line stabilized, with revenue from the non-infusion sector of 6.94 billion yuan (+0.17% yoy) in 2023, of which: 1) the chronic disease sector was hampered by the collection of fujiyue, norbaix, nifedipine sustained-release tablets, etc., and revenue declined slightly (-6% yoy); 2) revenue growth in the specialty sector was steady (+7% yoy), with significant growth in the nephrology and oncology sectors. Looking ahead to 2024, we are optimistic about positive revenue growth in the formulation sector. Among them: 1) the chronic disease sector is estimated to have no impact on the collection of key varieties in 24, and the growth rate is expected to be positive; 2) the specialty sector is optimistic about pediatric colacosamide, nephrological abdominal penetration, the psychoactive product pregabalin, and the launch of new oncology products, which will drive high-single-digit revenue growth over the same period last year.

Self-research focused on innovative platforms and technology, and the acquisition of Zizhu increased its R&D investment by 14% in 2023. During this period, the company received approval for 2 new drugs (IND and one for production), generic drugs and consistency evaluations. We are optimistic that the company will go hand in hand with epitaxial: 1) The self-development aspect focuses on small molecule innovation targets (Fascin protein targets and BePro prodrug platforms), and lays out 5 core technology platforms (microspheres/children's drugs/multi-chamber pouches/innovative crystals/continuous flow); 2) On the epitaxial side, the company announced its acquisition on February 24 Zizhu medicine 100% equity in the industry is optimistic that subsequent mergers will boost the company's profits (Zizhu 1-8M23 revenue/profit of 706 million/282 million respectively), and long-term collaboration in the field of gynecology. We are optimistic that during the “14th Five-Year Plan” period, the company will accelerate its significant development in the field of expertise and innovation.

Risk warning: The recovery of large infusions fell short of expectations, the price reduction of collected varieties exceeded expectations, risk of product development failure; BD cooperation fell short of expectations.