Performance has grown steadily, sales expenses have declined, and the “buy” rating has been maintained

2024H1 achieved revenue of 2.763 billion yuan (YoY +15.13%, same below); net profit to mother was 0.629 billion yuan (+15.46%). In terms of profitability, the company's 2024H1 gross margin was 72.50% (-1.25pct); net margin was 22.67% (-0.01pct). On the cost side, the 2024H1 company's sales expense ratio was 30.03% (-2.58pct); the management expense ratio was 4.16% (+0.22pct); and the R&D expense ratio was 10.91% (+1.00pct).

The company focuses on the layout of central nervous system drugs, benefiting from the recovery of surgical volume and the continuous expansion of application scenarios for narcotics. The company's old refined anesthesia products, “Hydroxerichua” and TRV130 are expected to continue to contribute to the company's revenue. We maintain our original profit forecast. We expect net profit to be 1.181, 1.401, and 1.668 billion yuan for 2024-2026, EPS of 1.17, 1.39, and 1.66 yuan/share. The current stock price corresponds to PE of 22.6, 19.1, and 16.0 times, maintaining a “buy” rating.

The revenue performance of narcotic products was impressive, with revenue from APIs and commercial pharmaceuticals increasing the company continuously strengthened its specialized promotion efforts, promoted market entry of new products, and promoted increased sales of narcotic drugs. 2024H1 narcotic products earned 1.522 billion yuan (+20.04%), accounting for 55.09% of total revenue; revenue from psychotropic products was 0.595 billion yuan (+8.17%), accounting for 21.55% of total revenue; revenue from neurological products was 0.08 billion yuan (+8.51%), accounting for 0.08 billion yuan (+8.51%) 2.89%; offline+online jointly drive the development of the Enhua chain. 2024H1 added 18 new stores, reaching 178 stores, 2024H1 commercial pharmaceutical revenue 0.359 billion yuan (+23.64%); API revenue was 0.096 billion yuan (+26.59%).

Performance drivers are clear, and innovative research and development is progressing steadily

The company continues to establish differentiated competitive advantages of products to achieve steady growth of old products; achieved rapid growth in recently approved anesthesia series products through market access, academic promotion, etc.; the company established an emerging and sleep division to sink the business of anesthesia, mental and neurological products, dig deeper into the grassroots and sleep markets in the county area, ensure the rapid growth of uncollected products and gradually reduce the impact of collection of spiritual products. In terms of innovative drug research and development, 1 phase III clinical research project (NH600001 emulsion injection) is currently being carried out; 2 phase II clinical research projects (NHL35700 tablets, YH1910-Z02 injections) are being carried out.

Risk warning: risk of price reduction in collection; risk of drug development failure; risk of increased product competition, etc.