1Q24 revenue increased 29% year over year, with a sharp increase after deducting non-net profit

The company announced 1Q24 revenue of 270 million yuan (+29% yoy), net profit to mother of 90 million yuan (+172% yoy), and deducted non-net profit of 90 million yuan (+203 percent yoy). The rapid growth in performance was mainly due to rapid deployment of core products and cost control. Based on the company's improved operating efficiency and gradual confirmation of authorized revenue, we expect the company to have a net profit of 2.1/23/270 million yuan in 2024-26. Referring to the biosimilar Biotech's average market value of 14.5 billion yuan, considering the gradual implementation of the company's innovation pipeline and outstanding self-exempt commercialization capabilities, we will give the company a 24-year target market value of 20 billion yuan and a target price of 32.43 yuan to maintain the “increase in holdings” rating.

Exaipu: Rapid growth under a low base. Following up on the collection policy, we estimate that 1Q24 Yisaipu's revenue increased 26% year over year to 160 million yuan (1Q23 to 130 million yuan). The high growth was mainly due to the low base and water needle contributions during the same period (water needle was not listed during the same period). Considering the impact of the expansion of collection, we expect Yisaipu's revenue to face some pressure in '24:1) Price: 3M22 Yisaipu will use 127 yuan (about 60% reduction) as an alternative to entering Guangdong Union Mining (Meng mining region accounts for less than 10% of sales volume, receiving 70% pre-harvest), which will have an impact on ASP after gradual implementation in 2023 (it is estimated that 2023E ASP will decline ~ 15%). If the scope of collection expands, it may cause ASP to decline further; 2) Sales:

Benefiting from diagnosis, treatment, repair, and marketing, we expect double-digit sales growth. If collection is expanded, price is expected to be exchanged for volume. In addition, the company is driving volume through pre-filling water injections and county sinking.

Continued doses of cyptine and genipere, CDMO is expected to be stable

1) We expect Saiptin's 1Q24 revenue to increase 60.1% year-on-year to 80 million yuan, and is expected to grow by 30-40% in 24: the number of hospitals covered will continue to grow to more than 1,300 in 23 years. The CSCO guidelines recommend first-line treatment for advanced breast cancer. The successful renewal of the 1M23 contract and the lifting of joint reimbursement restrictions are expected to drive volume. 2) Genippe's 1Q24 revenue increased 91% year on year, and is expected to maintain a rapid growth rate of around 40% in 24; 3) We expect 1Q24 CDMO business revenue to be around 0.1 billion yuan, which is expected to remain steady year over year in '24.

The R&D pipeline is progressing smoothly, and management efficiency continues to improve

Since '21, the company has continued to focus on freestanding tracks, and 2024 is expected to usher in a good harvest period; 1) IL-17A:

4Q23 is expected to read out the main endpoint data for psoriasis phase III and NDA; 2) IL-4R: the first adult AD phase III patient enrollment (1M24); 3) 7M23 IL-5 completed phase II enrollment and phase III was initiated in 24 years; 4) Phase IB/II of IL-1β reached the main end point and advanced to phase III in 24 years; 4) IL-33 IND was approved.

It is expected that IL-17A (2024E), IL-1β (2025E), IL-4R (2026E), and IL-5 (2026E) NDAs will be gradually submitted from 2024. 1Q24's gross profit margin was 77.1% (+4.6pct), mainly due to process optimization; R&D/sales/management rates were 20%/19%/6%, respectively, -9/-7/-0.6pct. Rate optimization was mainly due to cost reduction and efficiency and the impact of the pace of cost confirmation.

Risk warning: Yisaipu price reduction risk, risk of product failure under development, commercialization risk.