Incident: The company issued a progress announcement on the repurchase of shares through centralized bidding transactions. As of April 30, 2024, the company had repurchased 3.468 million shares through centralized bidding. The repurchased shares accounted for 0.62% of the company's total share capital. The highest transaction price was 15.69 yuan/share, the lowest price was 13.05 yuan/share, and the total amount paid was 51.46 million yuan.

Active repurchases show confidence in long-term development. On January 26, 2024, the company reviewed and passed the “Proposal on the Plan to Repurchase Shares by means of Centralized Auction Transactions”. According to the share repurchase plan, the company will use centralized bidding transactions to repurchase shares from the secondary market. The total capital for the repurchase of shares will not be less than RMB 100 million and no more than RMB 200 million; the repurchase price will not exceed RMB 25 yuan/share, and this share repurchase will be used for subsequent implementation of share incentives or employee stock ownership plans.

The reversal of the aquaculture industry cycle may lead to a sharp rise in volume and price in the insurance sector. In recent years, the downstream aquaculture industry has continued to lose money, market demand is sluggish, and customer prices are sensitive, which has had a certain impact on the company's market development. According to data from the National Bureau of Statistics, at the end of the first quarter of 2024, the number of pigs stored nationwide was 408.5 million, a decrease of 22.44 million heads compared to the same period last year, a year-on-year decrease of 5.2%, setting a new low in 4 years. Judging from the number of pigs stored, it has been declining for 2 consecutive quarters since the third quarter of 2023, and the decline is increasing rapidly. At the end of the first quarter of 2024, the number of breeding sows was 39.92 million, a year-on-year decrease of 7.3%, and the number of breeding sows hit a four-year low. The double bottom of production capacity and storage indicates that pig prices will maintain an upward channel in the future, and the profit cycle is expected to continue for a long time.

Looking ahead to 2024, as production capacity on the aquaculture side continues to decline, the cycle may reverse or drive a sharp rise in volume and price in the insurance sector.

The construction of the company's key projects, including fund-raising projects, is progressing steadily. In 2023, the construction of the company's key projects, including fund-raising projects, progressed steadily. The first phase of the 4,500-ton fluorophenicol project and the second phase of the 1,500-ton doxycycline project were successfully put into operation; the commissioning of the sodium borohydride series product project; the infrastructure construction of the key pharmaceutical intermediate project with an annual output of 70,000 tons and the technical improvement project for pharmaceutical raw materials and intermediates with an annual output of 1,420 tons went smoothly, and some projects entered the comprehensive commissioning stage.

“One system, two platforms” create comprehensive advantages. The pharmaceutical sector is developing simultaneously to promote the integration of the industrial chain. In terms of manufacturing, the company is proficient in typical chemical reactions and solvent technology processes, saves costs through integrated research and layout, and forms the advantage of efficient manufacturing. In terms of channel platforms, the company provides services to domestic and foreign customers, integrates domestic and foreign trade. The sales network covers six continents, sells products to 115 countries and regions, and has established trade and cooperative relationships with more than 3,000 customers around the world. The company has established API sales channels in countries such as India, the Netherlands, South Korea, Pakistan and Spain, and semi-pharmaceutical products are also sold to Southeast Asia and Africa. In terms of pharmaceutical business, the company is one of the world's largest suppliers of macrolides and quinolone raw materials. Its products cover antibiotics, cardiovascular drugs, respiratory drugs, urinary system drugs and anti-tumor drugs. By the end of 2023, the company had produced and sold more than 70 APIs and intermediates, including 17 products with sales revenue exceeding 50 million yuan, 12 products exceeding 100 million yuan, and a layout of more than 30 specialty API products. Furthermore, the company promoted key intermediate products to support industrial development in an orderly manner, and basically completed the layout of the related industrial chain.

Profit forecasting and investment advice. EPS is expected to be 1.73 yuan, 2.13 yuan, and 2.55 yuan respectively in 2024-2026, and the corresponding dynamic PE will be 7 times 11/9/7 times, respectively, maintaining the “buy” rating.

Risk warning: risks such as project construction falling short of expectations, product sales falling short of expectations, and an outbreak of the epidemic in the aquaculture industry.