Incident: The company released its 2024 quarterly report. In Q1 of 2024, the company achieved revenue of 2,403 billion yuan, a year-on-year increase of 0.6%, and realized net profit of 845 million yuan, an increase of 24.90% over the previous year.

The company performed well in Q1 2024, and the abundant cash on the account is expected to help the company develop in the long term. According to the company's 2024 quarterly report, in Q1 2024, the company achieved revenue of 2,403 billion yuan, a year-on-year increase of 0.6%, and realized net profit of 845 million yuan, an increase of 24.90% over the previous year; the company's monetary capital reached 11.392 billion yuan; and transactional financial assets reached 1,443 billion yuan.

Recently, the company announced the 2024 employee stock ownership plan, which is conducive to stimulating the enthusiasm and creativity of the management team, promoting the growth of the company's performance, and enhancing the company's intrinsic value. According to the company's announcement, the total capital of the current employee shareholding plan is not more than 14.3055 million yuan, and the purchase price of shares is 37.78 yuan/share, involving a total of no more than 70 employees (including 6 directors, supervisors, and senior management). The assessment index for the current employee stock ownership plan is an individual performance evaluation index. The assessment period is 2024-2026.

Investment advice: The company is deeply involved in the fields of heat cleansing, detoxification, and pediatric medication. The competitive advantage of core products is obvious. As second-tier varieties gradually gain strength and BD products continue to be introduced, it may be expected to create a new growth curve for the company. In 2024-2026, we expect the company to achieve operating income of 10.02 billion yuan, 11.01 billion yuan, and 12.019 billion yuan, and net profit to mother of 3,035 billion yuan, 3.399 billion yuan, and 37.38 billion yuan, with year-on-year increases of 7.5%, 12.0%, and 10.0%, respectively. The corresponding EPS is 3.29 yuan, 3.69 yuan, and 4.06 yuan respectively. The PE multiples corresponding to the current stock price are 12.4X, 11.1X, and 10.1X, respectively. Considering the obvious competitive advantage of the company's core products, second-tier varieties are expected to gradually gain strength and maintain a “buy” rating.

Risk warning: policy risk, risk of increased industry competition, risk of introducing BD projects less than expected, risk of collection price reduction.