The company's recent situation

On June 12, 2024, the company announced the 2024 Restricted Stock Incentive Plan (draft) to grant 8.7616 million restricted shares to 860 incentive recipients.

reviews

The introduction of a stock incentive plan in 2024 is expected to further stimulate the vitality of middle management. According to the company's announcement, the plan is to grant incentives to 860 people, including directors, executives, middle management and core key personnel. The total number of restricted shares is 8.7616 million shares, accounting for 0.87% of the current company's share capital. Among them, middle management and core employees own 98.14% of the total benefits to be granted under this incentive plan, and the grant price is 11.51 yuan/share. Performance assessment targets for the three fiscal years 2024-2026: Based on 2023 deducted non-net profit, the growth rate of non-net profit deducted in 2024/2025/2026 is not less than 15%/33%/56%, that is, the year-on-year growth rate of 2024/2025/2026 deducted non-net profit is 15%/16%/17%, respectively. We believe that this performance assessment target shows the company's management's confidence in the company's long-term stable development in the future.

The core variety is growing steadily, and we are optimistic about the long-term growth potential of anesthetic products. According to the company's announcement, the company's anesthesia line product layout is rich. The revenue volume of the two old products midazolam and etomide has begun to take shape, and the company expects to maintain an annual increase of 15% in the future; the rapid release of anesthetic series products (remifentanil, sufentanil, aventanil, oxycodone, etc.) approved in recent years, we expect this series of products to maintain high growth in the future under the company's key promotion; TRV130 has been included in the medical insurance catalogue at the end of 2023. The company is expected to add 700-800 new admissions this year, reaching around 1,000 companies. It reached more than 0.1 billion yuan.

R&D is progressing steadily, and the simulation R&D pipeline continues to be realized. According to the company's announcement, as of March 2024, in terms of generic drugs and consistency evaluations, the company has 10 review projects for generic drugs declared production; 3 compliance evaluations are under review projects. In terms of innovative drugs, the company has 20 research projects. Among them, NH600001 emulsion injection (etomide upgrade product) has completed phase II clinical trials, and 3 products (NH102 tablets, NHL35700 tablets, and YH1910-Z02 injections) have completed phase I clinical trials. Looking at the pipeline layout, generic drugs and consistency evaluations are gradually being implemented, and innovative research products are expanding to the layout of refined narcotics control drugs. We believe that the future will further enrich the company's pipeline layout.

Profit forecasting and valuation

Taking into account the increase in management expenses due to stock price incentive expenses, we lowered our 2024 profit forecast by 3.4% to 1.221 billion yuan, and our 2025 profit forecast by 4.1% to 1.444 billion yuan. The current stock price corresponds to the 2024/2025 price-earnings ratio of 18.7 times/15.8 times. We are optimistic about the company's long-term stable development potential in the future. We maintain an outperforming industry rating and maintain a target price of 30.0 yuan (corresponding to 24.8/20.9 times the 2024/2025 price-earnings ratio), which has 32.5% upside compared to the current stock price.

risks

Drug collection price reduction risk; clinical progress falls short of expectations; product commercialization falls short of expectations.