Incident: The company signed a strategic cooperation agreement with Lilai Technology to obtain exclusive rights to the “PDRN” baby needle for about 30 million yuan. On 24/7/29, the company announced that its subsidiary Wu Zhong Aesthetics signed a strategic investment and cooperation agreement with Beijing Lilai Technology to obtain exclusive rights in Lilai Technology's injectable sodium hyaluronate - polydeoxyribonucleotide (PDRN) complex solution products and approximately 16.7% of Lilai Technology's shares. At present, the PDRN solution developed by Lilai Technology has entered the clinical trial stage. It is relatively advanced in China. It is expected to become the first batch of three PDRN device products to be marketed in China, and further improve the company's medical and aesthetic product layout.

PDRN has anti-inflammatory, tissue repair, collagen regeneration and other effects, and feedback from overseas markets is good.

PDRN solution is a functional water light product, and is also known as “salmon needle” in the medical and aesthetic market (mainly extracted from trout and salmon testes, which are rich in nucleic acid). Since the PDRN base composition is 98% similar to human DNA, this component does not cause obvious immune reactions, the product is highly safe, and has excellent biocompatibility and biodegradability. Numerous studies have been accumulated on the use of overseas PDRN products, proving that this ingredient has anti-inflammatory, tissue repair, and collagen regeneration effects.

PDRN products have been approved for marketing in many overseas countries, and no three types of mechanical products have been approved for marketing in China.

Currently, PDRN products have been approved for sale in Europe, Italy, South Korea and other countries. The main brands include NEWEST, H-DNA, REJURAN, VITARAN, etc., and the feedback from overseas medical and aesthetic markets is good. The PDRN solution in Korea is the most sought after water light acupuncture project in the Korean medical and aesthetic market in recent years. Currently, no PDRN solution type three medical device products have been approved for marketing in China. Existing products are mainly sold through imported cosmetics registration, and the potential market demand is very strong.

The PDRN market has broad prospects and is expected to contribute significantly to the company's medical and aesthetic field. With its multiple benefits such as anti-inflammatory, tissue repair, and collagen regeneration, PDRN has good market feedback from medical and aesthetic institutions, and is expected to quickly become a hit in the water light acupuncture market. Taking Pharma Research, the parent company of REJURAN, as an example, it successfully became the second-largest company by market capitalization in the Korean medical and aesthetic industry with only its REJURAN brand PDRN products. The PDRN solution cooperated by the company and Lilai Technology is expected to take the lead in seizing the domestic PDRN blue ocean market, contributing significantly to the company's long-term performance, while further improving the company's product layout and increasing market coverage in the medical and aesthetic field.

Profit forecasting and investment rating: The company's pharmaceutical products and industrial chain layout have also been fully arranged through endogenous epitaxial medical and aesthetic business. Its AestheFill Baby Acupuncture is positioned in the high-end regenerative market. It was officially approved in April, with good feedback from institutional terminals, and the number of partner institutions continues to increase; at the same time, it continues to restructure key areas such as collagen, PDRN, and table hemp through self-research, cooperative R&D and technology transfer, which is expected to contribute to increased performance over the long term. Since the PDRN product investment layout is still in the clinical stage, we maintain the company's 2024-26 net profit forecast of 0.125/0.262/0.403 billion yuan, corresponding PE of 47/22/15X, respectively, to maintain a “buy” rating.

Risk warning: Product progress under development falls short of expectations, product promotion falls short of expectations, risk of policy changes.