The company's revenue scale continued to grow at a high rate. In 2023, it achieved operating income of 1,017 million yuan (+67.51%); net profit due to mother in 2023 of 272 million yuan (+40.07%); deducted non-259 million yuan (+52.48%); sales/management/R&D expense ratios of 0.95%/12.64%/23.69%, respectively, and R&D expenses of 241 million yuan (+45.13%). Revenue for Q1 to Q4 of 2023 was 1.61/2.63/2.90/304 million yuan, respectively, and net profit to mother was 0.35/0.84/0.82/70 billion, respectively. In 2024, the company's revenue in Q1 was 216 million yuan (+34.04%), and net profit to mother was 50 million yuan (+42.06%).

Orders maintained a high growth rate, and the share of high-gross business increased. Looking at the business split, pre-clinical pharmacy research service revenue was 338 million yuan (+54.81%), gross profit margin of 64.76%; clinical service revenue of 193 million yuan (+141.25%), gross profit margin of 44.02%; independent research and development results converted 392 million yuan (+77.66%), with a gross profit margin of 78.62%, which converted 104 projects throughout '23; equity sharing revenue of 30 million yuan (-48.74%). In 2023, the company added 1,360 billion yuan of new orders (tax included, +35.06%), and ongoing orders of 1,586 billion yuan (+18.90%). Continued performance growth was maintained. The increase in the company's share of businesses such as the transformation of independent R&D results and equity sharing is expected to support the overall gross profit margin.

The company's relocation released production capacity, and the integrated service platform for drug development and production showed competitive advantages. In '23, the company moved to the R&D headquarters to free up production capacity and improve order acceptance capacity. The subsidiary Thermo Pharmaceuticals vertically lays out the CDMO field to help build a full-process service platform. In '23, Thermo Pharmaceuticals achieved a total internal and external revenue of 193 million yuan, undertook more than 360 projects, and completed CDMO services for 280 commissioned R&D projects; undertook external customers to achieve revenue of 52.49 million yuan (+152.35%). The construction of Thermo Pharmaceuticals can improve drug development efficiency and accelerate the commercialization value of products.

Profit forecast and rating: We expect the company's revenue for 2024-2026 to be 1,315/17.19/2,232 billion yuan, up 29.3%/30.7%/29.8% year on year; net profit to mother will be 3.53/4.60/615 million yuan, respectively, up 29.6%/30.5%/33.7% year on year. Maintain a “buy” rating.

Risk warning: Results fell short of expectations, new orders fell short of expectations, and industry competition intensified.