Incident: The company released the 2023 annual report and the 2024 quarterly report. 1) In 2023, the company achieved operating income of 1,017 million yuan, up 67.51% year on year; net profit to mother was 272 million yuan, up 40.07% year on year; net profit after deducting non-return to mother was 259 million yuan, up 52.48% year on year; 2) In the first quarter of 2024, the company achieved operating income of 216 million yuan, up 34.04% year on year; net profit from non-return mother was 48.72 million yuan, year on year. 41.00% increase

The main business continues to be strong, management capabilities are continuously optimized, and orders continue to grow rapidly. On a quarterly basis, 2023Q4 achieved revenue of 304 million yuan (+62.66%), net profit attributable to mother of 70.48 million yuan (+44.01%), and net profit of non-return to mother of 58.01 million yuan (+57.97%). In terms of profitability, gross profit margin in 2023 was 65.53% (-1.85pp), net profit margin 26.73% (-5.24pp), expenses were 9.65 million yuan (+23.08%), and expense ratio 0.95% (-0.34pp). Management expenses of 129 million yuan (+26.82%), cost ratio of 12.64% (-4.06pp), R&D expenses of 241 million yuan (+45.13%), cost ratio of 23.69% (-3.65pp). Financial expenses - 21.21 million yuan (+49.28%), expense ratio -2.08% (+4.80pp). Furthermore, in terms of orders, demand continued to grow in 2023, adding 1,360 billion yuan (+35.06% year-on-year) of orders. By the end of 2023, the company had ongoing orders of about 1,586 billion yuan (+18.90%).

Various business highlights are frequent, and the company's long-term development can be expected: 1. Entrusted R&D services: revenue of about 531 million yuan (+77.97%) in 2023, of which pre-clinical pharmacy research achieved revenue of 338 million yuan (+54.81%), clinical service sector of 193 million yuan (+141.25%), 178 annual project registrations and 63 approvals. We expect that as pre-clinical projects continue to expand, back-end clinical business is expected to accelerate; 2. Independent R&D technology transfer: about 392 million yuan (+77.66%) in 2023 We expect to gradually reap benefits as 59 Chinese amplification and 19 verification production stage projects continue to advance; 3. CDMO: In 2023, Thermo Pharmaceuticals undertook external customized R&D and production to achieve revenue of 52.49 million yuan (+152.35%). We expect that as CDMO production capacity gradually climbs and commercialization projects continue to be implemented, the CDMO sector is expected to usher in an accelerated implementation period; 4. Innovative drug development: The company's fastest progressing clinical BIOS-0618 in 2023, we expect to bring A certain degree of performance elasticity.

Profit forecast and investment advice: Considering the company's continued strong orders, we adjusted the company's profit forecast. We expect the company's revenue for 2024-2026 to be 1,339 billion yuan, 1,757 billion yuan, and 2,270 billion yuan (1,247 billion yuan and 1.69 billion yuan respectively before the adjustment), with growth rates of 31.59%, 31.21%, and 29.21% respectively; considering the company's gross margin after the release of CDMO production capacity, we expect the company's net profit to return to mother in 2024-2026 They were 381 million yuan, 510 million yuan, and 672 million yuan respectively (before adjustment, 2024-2025 were 392 million yuan and 532 million yuan, respectively), with growth rates of 40.11%, 33.96%, and 31.73%, respectively. Considering that the company continues to thrive on the racetrack, the company has plenty of room for development, and the order growth rate is relatively fast. In the future, it is expected that the expansion of CDMO and innovative drug transformation will bring long-term growth and maintain a “buy” rating.

Risk warning events: The public data used in the research report may have the risk of information being delayed or not updated in a timely manner, the risk of production capacity growth falling short of expectations, the risk of uncertain transfer of innovative drug R&D projects, the risk of declining gross margin, the risk of rising raw material supply and prices, environmental protection and production safety risks