Company event: The company released a performance report for the first half of 2024. In the first half of 2024, it achieved operating income of 2.84 billion yuan, a year-on-year increase of 5.6%, and achieved net profit of 0.73 billion yuan, an increase of 28.1% year on year; in 24Q2, it achieved operating income of 1.619 billion yuan, an increase of 15.8% year on year, and achieved net profit to mother of 0.409 billion yuan, an increase of 34.3% year on year. The performance exceeded our expectations.

The industry continues to be booming, and the company's performance is growing steadily and at a high rate. On the revenue side, under pressure from the short-term growth rate of 24Q1, the company's 24Q2 revenue growth returned to 15.8% from a high base in the same period last year. We judge that on the one hand, industry demand continues to be high, and on the other hand, new varieties such as chromatography and acidification have gradually begun to contribute revenue. In terms of net interest rate, 24H1's net interest rate reached 25.6%, up 4.5 percentage points from the same period last year. The company announcement showed that it was mainly due to factors such as product prices and cost control, which led to an increase in sales revenue and profit margins.

The company obtained several pulping stations during the 14th Five-Year Plan period, and the actual controller, Sinopharm Group, is strong. The company continued to maintain its leading position in the number of plasma collection stations and the scale of plasma collection in China. At the end of 2020, the company had 59 pulp collection stations (of which 55 were in operation). As of March 2024, the company had 102 pulp collection stations (of which 80 were in operation), and the company obtained 43 new batch pulp collection stations in the first three years of the 14th Five-Year Plan period, reflecting the company's strong strength of newly batch plasma collection stations in the blood products industry. The amount of pulp collection also increased steadily from 1,713 tons in 2020 to 2415 tons in 2023. Lay the foundation for the sustainability of the company's future performance. Considering the position and strength of the actual controller Sinopharm Group in the Chinese pharmaceutical industry, we judge that Tiantan Biotech is expected to achieve impressive results in terms of future Xinna pulp collection stations. We believe that Tiantan Biotech has the potential to grow into a global giant in the Chinese biomedical industry in segmented fields.

New varieties of chromatographic isopropyl release are imminent, and there is plenty of room to increase the profit of tons of slurry. In terms of the product hierarchy, Chengdu Rongsheng's fourth-generation chromatographic acidin (10%) has already been marketed. Compared with third-generation hydrochloric acid, this product is safer and more efficient to use clinically. Considering that the blood products market in overseas developed countries is mainly chromatographic isopropyl, we believe that this product has great potential in the future market and is one of the main driving forces for the company's slurry profit increase in the future. In terms of other products under development, Chengdu Rongsheng's recombinant human coagulation factor VIII has been approved for marketing. Human fibrinogen and human prothrombin complex from Lanzhou are in the marketing license application stage; Chengdu Rongsheng subcutaneously injecting human immunoglobulin and injectable recombinant human coagulation factor VII A is undergoing phase III clinical trials. The company's subsequent product lineup is relatively complete, and it is expected that the company will continue to improve its profit level in the future.

Profit forecasting and valuation. Considering the significant increase in the company's net interest rate in the first half of the year, we raised the company's net profit to mother in 2024-2026 to 1.41, 1.73, and 2.03 billion yuan (previous values were 1.39, 1.69, 2.02 billion yuan), and the year-on-year growth rates after the increase were 27.0%, 22.5%, and 17.8%, respectively. The PE corresponding to the current stock price was 33, 27, and 23 times, respectively, maintaining the “buy” rating.

Risk warning: risk of deteriorating competitive landscape; risk of sales falling short of expectations; industry policy risk, etc.