Incidents. On August 4, the company issued an indicative announcement regarding the signing of the “Share Transfer Agreement” and change of control by the controlling shareholder and its co-actors. China Resources 39 transferred the total shares of 0.418 billion shares held by Tianshili Group and its co-actors, accounting for 28% of the company's total share capital. The transfer price was RMB 14.85 per share, and the total transfer price was RMB 6.212 billion. Tianshili Group, the controlling shareholder of the company, signed a “Share Transfer Agreement” with Guoxin Investment, agreeing that Guoxin Investment will transfer 0.075 billion shares of the company held by Tianshili Group, accounting for 5% of the company's total share capital. The transfer price is RMB 14.85 per share, and the transfer price is RMB 1.109 billion.

reviews.

The entry of state-owned assets is expected to enable new development, and resource integration will enhance synergy efficiency. After the transaction is completed, Tianshili will enter the China Resources system and become a state-owned Chinese medicine member. As a leading enterprise in the Chinese medicine industry chain, the acquirer Huarun 39 continuously strengthens the construction of the Chinese medicine industry chain, grasps the two breakthroughs of standardized herbal medicines and intelligent manufacturing, takes into account the balanced development of all aspects of the industrial chain, and actively plays the main support and integration driving role of central enterprises to promote the modernization and industrialization of traditional Chinese medicine; starting with the standardization of the entire industry chain, Tianshi Li has built a comprehensive quality management system for the cultivation, extraction, production and marketing of Chinese herbal medicines, as well as a full range of quality management systems for drug development and clinical trials, combined with the needs and standards of the international market. Hair It also has outstanding advantages in terms of medical channels. We believe that by fully integrating the resources of both parties, it is possible to complement the traditional Chinese medicine industry chain, strengthen the chain, give full play to the collaborative value of R&D, and enhance innovation and development capabilities.

A leader in innovative research and development of traditional Chinese medicine, with an in-depth layout of various innovation pipelines under development. In 2023, Tianshili's R&D investment accounted for 17.73% of the pharmaceutical industry's revenue. As of the end of 2023, it had a R&D pipeline of 98 products under development, including 25 modern traditional Chinese medicine products, including 18 Class 1 innovative drugs; in the modern traditional Chinese medicine R&D pipeline, 2 loquat lung cleansing drink and warm jingtang have submitted production applications, and 19 products are in clinical phase II and III research stages. The treatment fields cover cardiovascular, digestive metabolism, tumors, central nervous system, etc. We believe that as a leading enterprise in innovative traditional Chinese medicine, the company has a rich layout in the research pipeline, laying the foundation for long-term growth in future performance.

Profit forecast: We expect the company's net profit to be 1.18 billion yuan, 1.299 billion yuan, and 1.391 billion yuan respectively in 2024-2026, up 10.2%, 10.1%, and 7.1% year-on-year, respectively. The corresponding EPS is 0.79 yuan, 0.87 yuan, and 0.93 yuan respectively. The company is deeply involved in modern traditional Chinese medicine innovation, has rich R&D reserves, and has resumed rapid growth in performance. Referring to comparable companies, we gave the company 20-25X PE in 2024, with a corresponding reasonable value range of 15.80-19.75 yuan, maintaining a “superior to the market” rating.

Risk warning: risk of R&D progress falling short of expectations, risk of price reduction in collection, risk of new product registration falling short of expectations, risk of asset impairment.