The company's 2023 annual report: In 2023, the company achieved operating income of 817 million yuan, an increase of 6.83% over the previous year; net profit to mother was 255 million yuan, an increase of 7.87% over the previous year; net profit after deducting non-return to mother was 243 million yuan, an increase of 6.57% over the previous year. In the fourth quarter of 2023, the company achieved operating income of 145 million yuan, a year-on-year decrease of 22.25%; net profit to mother of 0.29 million yuan, a year-on-year decrease of 51.00%; net profit after deducting non-attributable net profit of 31 million yuan, a year-on-year decrease of 50.17%.

The company's 2024 quarterly report: In the first quarter of 2024, the company achieved operating income of 301 million yuan, an increase of 14.61% over the previous year; net profit to mother of 112 million yuan, an increase of 20.08% over the previous year; net profit after deducting non-return to mother was 108 million yuan, an increase of 17.69% over the previous year.

Maintaining a good level of profit, the 24Q1 fee rate declined. In '23, the company's gross profit margin was 55.05% (YoY +3.55pct), net profit margin 31.09% (YoY +0.3pct); 24Q1 gross profit margin 58.29% (YoY -0.6pct), net profit margin 37.38% (YoY +1.7pct). In 24Q1, the company's sales expense ratio was 0.79%, +0.19pct year on year; the management expense ratio was 6.65%, -0.71 pct year on year; R&D expenses rate was 7.73%, -0.45pct year on year; financial expenses ratio was -1.95%, -1.71 pct year on year.

Production capacity construction progressed as scheduled, and production capacity gradually broke through bottlenecks. In terms of production capacity for API intermediates, all 7 workshops have completed plant construction. Of these, 1 workshop has completed completion acceptance, 3 workshops are undergoing trial production, 1 workshop has completed equipment installation, and 2 workshops are awaiting equipment installation. In terms of formulation production capacity, the highly active formulation workshop and oral solid preparation workshop have completed plant construction and equipment installation, and various product projects are progressing as scheduled.

Research and development projects continue to advance. By the end of '23, the company had a total of 43 research projects, of which 6 had been declared. At the same time, the company has also prepared a large number of projects to be developed that are technically difficult and have good market prospects.

Formulation projects are gradually being implemented: in '23, the company has 3 formulation projects (gout, neurological, anti-tumor) in the pilot phase, and 2 formulation projects (antimicrobials, antineoplastic drugs) are in the production reporting stage. Nine API projects are in the domestic and international review and approval stage.

Innovative drug cooperation and self-development: In terms of innovative drugs, the company is investing in new drug companies, expanding the new drug CRO/CDMO/CMO business, and promoting independent development. The phase II clinical trial of brozopent sodium, a new class 1.1 drug being developed by the company to treat ischemic stroke has ended and has yet to enter phase III clinical trials.

Profit forecast and investment rating: The development of the company's specialty APIs and formulations is accelerating, and cooperation between the internationalization of formulations and STADA is progressing steadily, which is expected to open up more space in the future. Considering that the CDMO industry is greatly affected by the international environment, we adjusted the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 3.2/4.0/520 million yuan, a year-on-year growth rate of 28%/24%/30%, corresponding to PE of 20/16/12 times, maintaining a “highly recommended” investment rating.

Risk warning: R&D progress falls short of expectations, risks such as safety and environmental protection, product commercialization, and geopolitics.