Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 411 million yuan (+68.44%), net profit to mother of -76.07 million yuan, and net profit after deducting non-return to mother of -88.06 million yuan. In the first quarter of 2024, the company achieved operating income of 92.89 million yuan (-17.52%), net profit to mother of -13.61 million yuan, and net profit after deducting non-return to mother of -17.38 million yuan.

In order to successfully enter medical insurance, Enomi's sales system was adjusted, and it is ready to go in 2024. Throughout 2023, the total sales revenue of new HIV drugs was about 73.5788 million yuan (+119.67%), of which enomil tablets achieved revenue of about 488.438 million yuan, and enovirin tablets achieved revenue of 247.35 million yuan (-26.15%), mainly due to the increase in sales of the compound agent enomib tablets, which decreased sales. At the end of 2023, Enomie tablets were successfully included in the medical insurance catalogue. At the same time, the company actively adjusted its commercialization strategy, strengthened sales team building and academic promotion, and increased channel decline. The number of new patients began to rebound in November 2023. As of the date of disclosure of the annual report, the number of new patients using enovirin tablets and enomide tablets was growing significantly, and the number of patients continued to grow. In the fourth quarter of 2023, the company's new HIV drug achieved revenue of 27.09 million yuan, showing a significant increase over the previous month; in the first quarter of 2024, the company's new HIV drug achieved revenue of 357.11,200 yuan, an increase of 76.52% over the previous year, an increase of 31.81% over the previous year, and the volume trend is clear. We expect that new HIV drugs are expected to maintain a quarter-on-quarter growth trend in 2024, driven by the release of Enomil tablets. The company's research and development of new HIV drugs is progressing steadily. ACC017 (integrase inhibitor) has entered clinical phase I, and various varieties such as ACC027 are in different stages of development to provide a comprehensive treatment plan for HIV patients.

The human-derived egg business has fluctuated, and strengthening the industrial chain layout is expected to increase profits. The company's human protein business performed well in 2023, with revenue from crude urokinase products amounting to 177 million yuan (+71.46%), mainly due to increased procurement volume from Nanda Pharmaceutical; revenue from crude urastatin products was 79.5521 million yuan (+98.15%), mainly due to the resumption of procurement by Temple Biochemical. In the first quarter of 2024, the company's raw human protein business revenue decreased by 38.2141,000 yuan compared to the same period last year. We expect this is mainly due to fluctuations in customer seasonal purchase amounts and price reductions in urokinase collection. The company announced that it plans to acquire 31.161% of Nanda Pharmaceutical's shares to further strengthen the industrial chain layout, which is expected to increase profits.

Profit forecasting and valuation. We expect the company's revenue from 2024 to 2026 to be 567 million yuan, 817 million yuan and 1,097 million yuan, respectively, with year-on-year growth rates of 37.9%, 44.0% and 34.4%, respectively; net profit to mother will be -35 million yuan, 35 million yuan and 163 million yuan respectively. Based on the closing price on May 13, the corresponding PE will be -194.2 times, 194.3 times and 41.5 times, respectively, maintaining the “buy” rating.

Risk warning: The procurement price reduction for core products exceeded expectations; the volume/approval progress of innovative HIV drugs fell short of expectations.