Core products maintained high growth, and operational efficiency continued to improve, maintaining the “buy” rating. In 2023, the company achieved operating income of 2,693 million yuan (+15.75% year over year, all the following are year-on-year scales); net profit to mother of 368 million yuan (+36.54%); net profit after deducting non-return to mother was 340 million yuan (+36.91%). In 2024Q1, the company achieved operating income of 591 million yuan (+17.74%); net profit attributable to mother of 126 million yuan (+63.44%); net profit after deducting non-attributable net income of 106 million yuan (+53.90%). On the cost side, the company's 2023 sales expense ratio was 48.56% (-3.87pct); management expenses ratio 3.64% (+0.83pct); R&D expenses ratio 9.44% (+0.79pct); financial expenses ratio 0.22% (-0.37pct). 2024Q1 company sales expense ratio 40.50% (-5.65pct); management expense ratio 3.33% (-0.52pct); R&D expense ratio 6.93% (-1.56pct); financial expense ratio 0.68% (+0.70pct). We are optimistic about the company's market advantage in the field of transdermal drug delivery. The net profit forecast for 2024-2025 was raised and the 2026 net profit forecast was 5.11/6.49/810 million yuan (originally estimated 2024-2025 was 4.91 billion yuan and 607 million yuan), EPS was 1.48, 1.88, and 2.35 yuan/share, respectively. The current stock price corresponding to PE is 23.6, 18.6, and 14.9 times, respectively, maintaining a “buy” rating.

The revenue performance of loxoprofen gel patch was impressive. The raw materials business continued to grow at a high rate, and the company's pharmaceutical sales achieved sales revenue of 2,236 billion yuan (+15.86%) in 2023. Among them, loxoprofen sodium gel patch achieved sales revenue of 1,547 million yuan (+18.70%); other oral solid preparations achieved sales revenue of 689 million yuan (+9.89%). The company's API and pharmaceutical excipients business achieved API sales of 168 million yuan (+29.87%); sales of pharmaceutical excipients of 176 million yuan (+7.56%); and sales of plant extracts of 73 million yuan (+21.60%) in 2023. In 2023, the company's CXO service achieved sales revenue of 38 million yuan (-8.40%).

The in-hospital and in-hospital markets are progressing steadily, and the company's R&D investment continues to increase, and the company's in-hospital clinical business is progressing steadily. The in-hospital market share of loxoprofen sodium gel patch has been steadily expanding, with rapid release outside the hospital; ketoprofen gel patch participated in the national health insurance negotiations for the first time, successfully included in the national health insurance catalogue at an appropriate price, and sales will begin in 2024; the online e-commerce platform outside the hospital has been fully deployed, and the new channels have brought about a significant increase in performance. The company continued to increase R&D investment in 2023. The annual R&D investment was 269 million yuan, accounting for 9.99% of the company's revenue, an increase of 28.14% over the previous year. The company's 7 pharmaceutical varieties were approved for listing in 2023.

Risk warning: risk of changes in industry policy, risk of new drug development, risk of raw material supply and price fluctuations, etc.