The 2023 and 2024 quarterly results are in line with our expectations

2023: Revenue of 292 million yuan, -28.26% year on year; net profit attributable to mother of 116 million yuan, or -38.05% year on year; net profit of 112 million yuan, or -36.89% year on year. 2024Q1: Revenue of 65 million yuan, -30.2% year on year, net profit attributable to mother of 0.14 million yuan, -69.3% year on year, after deducting non-net profit of 112 million yuan, -73.46% year on year. In line with our expectations, the phased pressure on performance was mainly due to a decrease in LNP (lipid nanoparticle) revenue, delays in order delivery from major overseas customers, and a reduction in Pegbin sales commissions.

Development trends

Product sales were under pressure in the short term, and medical devices grew steadily. Looking at the 2023 segment by sector: 1) Product sales: revenue of 270 million yuan, with sales revenue of products in China of 130 million yuan, -2.79% year over year, mainly affected by downstream customer order delivery time and order volume. Overseas product sales revenue was 140 million yuan, -25.29% year over year, mainly due to a decrease in LNP (lipid nanoparticle) revenue and delays in order delivery from major overseas customers; 2) Medical devices: revenue +21.48% year over year, relatively stable; 3) Technical services: revenue ratio of -78.47%, mainly due to -78.47% Starting in April 2023, sales commission revenue for Tebao Pegbin products will no longer be generated, and Tebo's newly launched products are still in the early stages of release.

The self-development pipeline is progressing in an orderly manner. The small cell lung cancer indications of the PEG-Irinotecan project, a class 1 innovative drug independently developed by the company, have completed phase II clinical trial data analysis and obtained positive results. Currently, the project is cooperating with CDE to upgrade the phase III clinical trial formulation plan; phase II clinical enrollment for breakthrough treatment of glioma with the second indication is progressing smoothly. The company's self-developed third-class medical device injectable cross-linked sodium hyaluronate gel (JK-2122H) has completed clinical research. The clinical trial of the Injectable Complex Sodium Hyaluronate Solution (JK-1136H) project has completed the enrollment of all 480 subjects and entered the observation and follow-up phase. The company expects to complete the clinical trial in the fourth quarter of 2024.

Continue to invest in research and development. In 2023, the company invested a total of 57.82 million yuan in R&D, accounting for 19.79% of sales revenue. In 2023, the company completed process optimization, improvement and expansion of 16 derivative products, and completed the development of 106 new structural derivatives and the development of 179 analytical methods. The company continuously improves the ability to industrialize R&D products, continuously improves the production process of existing products, reserves certain market-forward-looking new technologies and products, and cultivates the ability of the R&D team to respond quickly to cutting-edge technological trends.

Profit forecasting and valuation

The profit forecast for 2024 and 2025 remains unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 30.7 times/24.5 times.

Maintaining an industry rating and a target price of 100.00 yuan, corresponding to 38.4 times the 2024 price-earnings ratio and 30.6 times the 2025 price-earnings ratio, with 24.9% upside compared to the current stock price.

risks

Core technology iteration, overseas operation, marketing, environmental safety, reduction or unsustainable collection of technical service fee revenue, and poor marketing or life cycle management of downstream terminal products.