Key points of investment

Incident: The company announced its 2023 annual results, with 2023 revenue of 12.430 billion yuan (-1.58%, same ratio in parentheses, same below), net profit attributable to mother of 1,954 billion yuan (+2.32%), net profit not attributable to mother of 1,881 billion yuan (+0.05%). 2023Q4 had revenue of 2,775 million yuan (-11.7%) in a single quarter, net profit attributable to mother of 352 million yuan (-12.6%), and net profit after deducting non-return to mother of 306 million yuan (-17.7%).

Prescription drug policy impact+ short-term pressure on the API and Chinese medicine sector to form a breakthrough: by sector, the chemical formulation sector's revenue was 6.57 billion yuan (-6%), mainly due to medical insurance price cuts in national negotiations, and prescription drugs were affected by industry policy fluctuations; the revenue of the biological products sector was 80 million yuan (-79%), mainly due to the end of transient procurement of drugs used in the epidemic; the revenue of the APIs and intermediates sector was 3.25 billion yuan (+4%), and the severe external situation and external situation of raw materials in the global trade Under a fierce competitive pattern, with high-end Antibiotics and high-end pet medicines formed a breakthrough; the traditional Chinese medicine formulation segment generated revenue of 1.75 billion yuan (+39%), seizing the recovery of traditional Chinese medicine policies and influenza opportunities to achieve sales volume for key varieties. The diagnostic reagents and equipment segment generated revenue of 660 million yuan (-8.9%).

24 years of consolidation and dominance in the field of sex hormones and digestion, and the COVID-19 vaccine's impairment was cleared, and pressure on the profit side was released: 23 ① Key projects were implemented, which are expected to drive 24-year performance growth, including the listing of triprarelin microspheres, production of aripiprazole microspheres and registration verification, and approval for the marketing of bunanserin tablets and quetiapine sustained-release tablets. ② Vaccine amortization and impairment affected the company's net profit of 310 million yuan. Subsequent COVID-related impairment effects were cleared, maintaining the 24-year net profit deduction forecast of > 10%.

High-end formulations and biopharmaceutical pipelines accelerated in 25-27, with incremental products contributing to a peak sales of 6.5 billion yuan: including stimulant fields: ① triprorelin microspheres (already on the market) and ② goserelin sustained-release implants (Phase I clinical, 2027E). The market corresponds to 1.5 billion yuan and 3.8 billion yuan, respectively. Imported products still account for 90% + share, and are expected to quickly achieve 30% import substitution, contributing 500 million yuan and 1.1 billion yuan in revenue. ③ Mental field: The production of aripiprazole microspheres has been accepted, and octreotide microspheres have entered BE clinical trials. Using the company's original psychiatric channels, long-term dosage forms meet urgent clinical needs and psychiatric competition is relatively blue. We expect aripiprazole sales to peak at about 900 million yuan. ④ Biological products: Simeglutide diabetes indications are expected to be produced in 24Q2. 24m2 of weight loss indications will enter phase III. The dual market space for diabetes and weight loss will exceed 100 billion yuan. We forecast a peak sales value of 2 billion yuan. ⑤ IL-17A/F dual-target monoclonal antibody (phase III clinical trial, 2027E launch). The psoriasis+ankylosis market has about 570+5.6 million people. It is expected to be the first IL-17 dual-target monoclonal antibody in China. We forecast a peak sales value of 1.5 billion yuan. ⑥ IL-6R tocilizumab (approved) for approximately 4.2 million patients with moderate to severe rheumatoid arthritis, we forecast a peak sales of 500 million yuan.

Profit forecast and investment rating: Considering procurement and health insurance policy factors, we adjusted the company's 2024-2025 revenue from 143.1/15.93 billion to 131.4/13.97 billion yuan, with an estimated 2026 revenue of 14.83 billion yuan; net profit of 24.4/2.79 billion yuan to 21.9/2.50 billion yuan, expected to be 2.83 billion yuan in 2026, and the current stock price corresponding to 2024-2026 PE is 16/14/12 ×, respectively. Considering the company's innovative attributes, the launch of new products will bring rapid performance growth, high barriers to complex formulations and exclusive patented products, high dividends, and a stable main business with strong certainty, long-term optimism, and maintenance of a “buy” rating.

Risk warning: product price reduction, new drug research and development, fluctuating raw material prices, pharmaceutical policy uncertainty.