Key points:

Actively enterprising, transforming from a leader in heparin to an international leader in high-end formulation, the company deeply cultivated the heparin industry chain, successfully built the first growth curve, integrated heparin raw formulations, and achieved an international and domestic dual cycle strategy. The company continues to transform and expand to high-end small-molecule formulations, while laying out high-end biologics, creating a full-product industry chain layout for the export of “standard heparin/enoxaparin plus small molecule anti-tumor injections+other high-end preparations”, and is committed to developing into a world-class comprehensive pharmaceutical enterprise.

International and domestic markets drive continued growth in the formulation sector

The main growth driver in the international market comes from the continuous approval and commercialization of the high-end complex preparation albumin paclitaxel, and active expansion of production capacity. In 2023, 6 new production lines passed FDA on-site inspections, and the formulation production line rose to 12, and the production capacity of preparations exported from the US doubled.

Domestic market harvesting is expected to resume steady growth: of the company's four core products, 3 have already participated in the collection, only heparin sodium has not yet participated, and the risk exposure to subsequent collection of stock products is relatively low.

In 2023, the company's two core varieties, enoxaparin sodium and natriparin calcium, were collected at the same time, which disrupted the performance in the short term. In the medium term, the original drug with the highest market share was sold. The company's two products were compensated by volume. Subsequently, as the market share of the company's products further increased, overall sales of the two products are expected to stabilize. At the same time, with the launch of new products, the domestic formulation business is expected to resume steady growth.

Risks in the heparin API sector have been released to a certain extent

The heparin API industry showed a certain degree of cyclicality. It was affected by the removal of downstream formulations. Since 2021, the industry has entered a downward cycle. In the fourth quarter of 2023, the company planned to reduce the price and depreciation of some inventory, and risks in the API sector have been released to a certain extent. Currently, the price and export volume of heparin APIs are at historically low levels. As downstream inventory removal is completed, the sector is expected to bottom up and rise.

Investment advice

We expect the company's EPS to be 0.54 yuan, 0.69 yuan, and 0.92 yuan respectively in 2024-2026. The current stock price corresponding to 2024-2026 PE is 21.41, 16.50, and 12.51 times, respectively, covered for the first time, giving it an “gain” rating.

Risk warning

Risk of price fluctuations of heparin APIs; risk of continued impairment of inventory; risk of product quality control; geopolitical risk; risk of drug development failure and commercialization falling short of expectations; exchange rate risk.