Key points of investment

Incident: The company released its 2024 semi-annual report. In the first half of 2024, Enhua Pharmaceutical achieved revenue of 2.76 billion yuan (+15.1%), net profit of 0.63 billion yuan (+15.5%) to mother, after deducting 0.63 billion yuan (+16.3%) of non-net profit. The Q2 Company achieved revenue of 1.41 billion yuan (+15.1%), net profit attributable to mother of 0.36 billion yuan (+14.6%), and net profit of non-attributable net profit of 0.37 billion yuan (+16.0%).

The anesthetic category continues to gain strength, and the neurological category shows new performance growth points. By product line: 1) Anesthetics achieved revenue of 1.52 billion yuan (+20.0%) in the first half of 2024. The four major varieties of the core product “Hydroxerichuat” are in a period of growth; the opioid analgesic oxelidine fumarate injection (TRV130) was launched in May 2023 and included in medical insurance in December 2023. It is expected that about 1,000 hospitals will be admitted to the hospital in 2024 to reap dosage results. 2) In the first half of 2024, revenue for psychiatric products was 0.6 billion yuan (+8.2%), and revenue for neurological products was 0.08 billion yuan (+8.5%). The neurological drug Antitan (deuterabenazine tablets) was introduced from TEVA in February 2024 and is expected to drive a significant increase in neurological revenue in 2024.

Release an equity incentive plan to demonstrate confidence in the company's performance. On June 12, 2024, the company announced the 2024 Restricted Stock Incentive Plan (draft). The plan is to grant a total of 8.7616 million restricted shares to 860 incentive recipients, including 8.5988 million shares to 857 middle management and core employees, at a grant price of 11.51 yuan per share. Company-level performance assessment requirements: After excluding share payment fees, the 2024-2026 growth rates are not less than 15%, 33%, and 56% (corresponding to year-on-year growth rates of 15.0%, 15.7%, and 17.3%), respectively, based on net profit deducted from mother in 2023, reflecting the company's positive expectations for steady growth in performance.

Investment advice: The company focuses on central nervous system segments and has a characteristic strategic positioning. Optimistic about the continued release of the company's anesthesia line products, we forecast net profit of 1.21/1.43/1.68 billion yuan in 2024-2026, corresponding to the PE valuation of 21.3/18.1/15.3 times. Maintain a “buy” rating.

Risk warning: industry policy risk, risk of product sales falling short of expectations, risk of R&D progress falling short of expectations, etc.