Profit side flexibility was gradually released. The three core sub-businesses developed steadily in 2023, and the company achieved operating income of 435 million yuan, an increase of 9.93% year on year; net profit to mother of 70.34 million yuan, up 9.08% year on year; net profit after deducting non-return to mother of 60.21 million yuan, an increase of 6.38% year on year. With 2024Q1, the company achieved operating income of 104 million yuan, an increase of 27.65%; net profit due to mother was 16.47 million yuan, an increase of 17.38% year on year; net profit after deducting non-return to mother was 15.29 million yuan, an increase of 136.17% year on year. The company's three core sectors are developing steadily. A variety of peptide API products have been registered at home and abroad. The peptide-preparation products injectable somatostatin and atoxibane acetate injections have won the 8th batch of national collection. The CDMO research pipeline project continues to advance in the later stages, continuously opening up room for growth. We are optimistic about the long-term development of the company, maintaining the original profit forecast and adding the 2026 profit forecast. We expect the company's net profit to be 1.41/1.76/211 million yuan, EPS is 1.26/1.57/1.88 yuan, and the current stock price is 21.9/17.5/14.6 times, maintaining a “buy” rating.

The “barefoot” variety in the formulation business won the bid. Strong downstream demand in the API business is expected to grow rapidly, and the formulation business will achieve revenue of 177 million yuan in 2023, an increase of 31.22% over the previous year. The company currently has registration approvals for 9 types of polypeptide preparations. Atosiban acetate injection and somatostatin for injection were successfully selected for the eighth batch in the first ranking, which is expected to open up upward space for formulations. In 2023, the API business achieved revenue of 119 million yuan, a year-on-year decline of 15.07%. In 2023, the company has mastered large-scale production technology for 17 kinds of APIs. Of these, 13 varieties have obtained domestic production approval, and 9 have obtained US DMF registration (active status). Simeglutide APIs have been filed with the US FDA. With the rapid release of downstream market demand represented by GLP-1, the company's peptide API business is expected to enter a period of rapid growth.

Continue to promote the construction of peptide production capacity. New production capacity is about to be implemented to break through supply-side bottlenecks. The company continues to promote peptide production capacity construction and continuously improve the quality management system. In terms of the API business, the main construction of the company's IPO fund-raising project “395 kg of peptide API production line project” has been completed, and construction of new 106, 107, and 108 API workshops is also progressing in an orderly manner. In terms of the formulation business, the main construction of a new R&D peptide formulation production line in Dayi County has been completed. In the future, it will become the company's innovative peptide drug conversion center and high-end formulation production base.

Risk warning: Pharmaceutical policy changes, project progress falling short of expectations, declining demand for peptide drug research and development.