Incident: 1) The company held a high quality development seminar and investor exchange meeting in Shouxian Valley to share and communicate on the company's scientific and technological innovation, development strategy, market prospects, etc.; 2) The company issued an announcement about winning the first prize of the National Science and Technology Progress Award, led by Professor Li Yu, an Academician of the Chinese Academy of Engineering. Shouxian Valley was the co-completion unit, and Dr. Li Zhenhao, Vice Chairman of Shouxian Valley as the co-completion person. The “Key Technological Innovation and Application of Food and Medicinal Bacteria Industry Chain” project won the first prize of the National Science and Technology Progress Award.

Make up for marketing shortcomings and unify the planning of the four major levels of brand, product, channel, and organization. The company focuses on marketing and enterprise development, and adheres to the development strategy of establishing technology enterprises and managing strong enterprises. The exchange meeting held recently was also a detailed sharing of strategies. Scientific and technological innovation relies on platform and team advantages, adheres to the research model of the whole industry chain, lays the company's strong product strength foundation, and builds the world's leading brand of Ganoderma lucidum. At the same time, a draft three-year action plan for marketing enterprises was released at the conference, which readjusted the market division, sorted out the brand matrix, divided products into main promotion, promotion, tactical and supplementary products, and made product combinations according to the characteristics of different channels. Market development gradually transitioned from direct management to agency model, focusing on the six major channels of chains, medical centers, supermarkets, specialty stores, and major customer circles to consolidate the position of the core product industry.

The scientific research board is stronger. Award-winning projects are conducive to enhancing product competitiveness and demonstrating the company's scientific research strength. The National Science and Technology Progress Award is one of the highest honorary awards for science and technology in China. For the winning project “Key Technology Innovation and Application in the Whole Food and Medicinal Bacteria Industry Chain”, the efficient breeding technology built by the company achieved multi-dimensional systematic evaluation of new germplasms such as Ganoderma lucidum in terms of agronomic traits, genetic information, physico-chemical characteristics, functional components and biological activity, and successfully selected the excellent new varieties of the Xianzhi series, which significantly improved the quality of Ganoderma lucidum and Ganoderma lucidum spore powder products, and also reflected the company's scientific and technological innovation capabilities.

The first quarter showed a recovery trend, and we look forward to improved demand and the results of the company's marketing reforms. 24Q1 achieved revenue of 0.22 billion yuan, up 7.2% year on year, and achieved net profit of 0.08 billion yuan, up 23.2% year on year. Revenue in the first quarter showed a recovery trend. After excluding eviction earnings, the profit growth rate was slightly higher than revenue, and the overall performance was in line with expectations. Looking ahead to the full year, we expect the company's performance to recover well. In particular, the third and fourth quarters are used as traditional peak sales seasons. The base for the same period last year was relatively low, and the company further sorted out the market, brands and products, actively made up for marketing shortcomings, and we expect the effects of adjustments and reforms to gradually show.

Investment advice: The development of the traditional Chinese medicine and health products industry is expected to maintain a relatively stable growth rate in the future. The company has the core competitive advantage in the industry, continuous scientific research and innovation capabilities to consolidate product strength, and has accumulated a stable customer base with high brand loyalty. Currently, it is actively carrying out marketing reforms to expand the national market, and is looking forward to demand repair and reform results. We expect the company's net profit to be 0.3 billion yuan, 0.33 billion yuan, and 0.37 billion yuan respectively in 2024-2026. The current stock price corresponding to the 2024-2026 valuation is 15 times, 14 times, and 12 times, respectively, maintaining a “buy” rating.

Risk warning: Industry competition intensifies, consumer demand recovery falls short of expectations, marketing reforms fall short of expectations, fluctuations in profitability, food safety risks.