Incident: On August 8, 2024, Eli Lilly released its 2024 semi-annual report. In the first half of 2024, it achieved revenue of 20.071 billion dollars (+31.42% YoY) and net profit of 5.21 billion dollars (+67.62% year over year). Of these, telpopeptides (including Mounjaro and Zepbound) sold 6.658 billion dollars, accounting for 33%. Considering the strong performance of products such as tilpopeptides, Lilly raised its annual revenue forecast by 3 billion dollars to 454 to 46.6 billion dollars.

The accelerated release of Eli Lilly tiberopeptide is beneficial to the company's solid phase synthesis carrier products. 2024H1 Eli Lilly's performance increased significantly, mainly due to the strong influence of the peptide drug tirpotide diet. Among them, the Mounjaro dosage achieved revenue of 4.897 billion US dollars (+216.33% over the same period), and the Zepbound dosage form marketed in 2023Q4 contributed 1.761 billion US dollars in revenue. Tilpotide has performed strongly since its launch in mid-2022, with quarterly sales showing a significant growth trend. Among them, 24Q1/Q2 achieved revenue of 2.324/4.334 billion dollars, respectively, and 24Q2 achieved a month-on-month growth rate of 86.50%, indicating strong downstream demand, and demand is expected to grow further as channels and supply continue to expand and strengthen. It is expected that 24H2 tilpotide sales will continue to perform well. Tilpopeptide uses a solid phase synthesis method, and solid phase synthesis carriers are its key consumables. Lanxiao Technology, as an important supplier of solid phase synthesis carriers for Eli Lilai, is expected to benefit the core as sales scale of related drugs grows rapidly.

Leading adsorption and separation materials, platform-based enterprises are flourishing more and more. The company is a leading domestic adsorption and separation materials company. It has a complete product spectrum and is widely used in six major fields, including water treatment and ultrapure water, life science, metal resources, energy saving and environmental protection, chemical and catalysis, and food processing. Specifically, (1) In the field of water treatment and ultrapure water, the company has high-end drinking water, ultrapure water and various grades of industrial water treatment resin products. With the increase in the installed capacity of household water purification equipment, the demand for high-end water treatment resins was clearly boosted. In 2020-2023, the sector achieved revenue of 1.70/0.288/0.421/0.513 billion yuan respectively. The year-on-year growth rate in 2021-2023 was 69.44%/46.37%/21.99%, respectively, which is one of the main driving forces for the company's performance growth. Water treatment is one of the main drivers of the company's performance growth. The ultrapure water sector is also the company's main source of revenue, accounting for 32.99% of the revenue of adsorption and separation materials in 2023; (2) In the field of life science, the company provides various products such as chromatography media, chromatographic fillers, microcarriers, solid phase polypeptide synthesis carriers, nucleic acid solid phase synthesis carriers, adsorbent materials for Western medicine, immobilized enzyme carriers, etc. Among them, solid phase synthesis carrier products can be used in the synthesis of peptide drugs and nucleic acid drugs. Benefiting from the rapid development of biopharmaceuticals in recent years, life science product companies became one of the main performance growth engines in 2020-2023, respectively. revenue 1.43/0.201/0.318/0.444 billion yuan, with year-on-year growth rates of 40.57%/58.08%/39.72% respectively in 2021-2023. The share of adsorption and separation material revenue also showed an upward trend, growing from 24.21% in 2020 to 28.55% in 2023; (3) In the field of metal resources, the company's special adsorbents for wet metallurgy can be used in the extraction of various metals such as gallium, lithium, uranium, cobalt, scandium, rhenium, nickel, copper, gold, indium, and vanadium. This sector supports the company's performance First, revenue of 0.92/0.122/0.218/0.197 billion yuan was achieved in 2020-2023, accounting for 15.61%/13.59%/15.86%/12.68% of the revenue of adsorption and separation materials, respectively, which are the company's third largest revenue source; (4) In the field of energy saving and environmental protection, environmentally friendly series adsorption and separation materials are widely used in chemical, dye, pesticide, pharmaceutical and other industries, and achieved revenue of 0.64/0.134/0.135/0.185 in 2020-2023, respectively billion yuan, the year-on-year growth rate in 2021-2023 was 108.28%/1.23%/36.97% respectively; (5) In the field of chemical applications, the company mainly provides chelated series resins for ionic film caustic soda, purified resins for raw materials such as hydrogen peroxide, polysilicon, etc., and MTBE. The revenue share of this sector is relatively steady. In 2020-2023, products in the chemical sector achieved revenue of 0.53/0.089/0.15/0.141 billion yuan respectively, accounting for 9 percent of the revenue of adsorption and separation materials in the past four years Within the range of% -11%; (6) In the field of food processing, the company provides technology covering application fields such as deep processing of juice, amino acids, organic acids, lactic acid, and sugar decolorization. Currently, the juice market size is stable. The company's global market share as a mainstream resin treatment process supplier in the industry has reached more than 80%. The sector's revenue contribution has been steady in recent years, and achieved revenue of 0.47/0.046/0.044/0.043 billion yuan respectively in 2020-2023.

Software and hardware collaborate to innovate and implement the “material+equipment” integrated model. The company adheres to the integrated development of materials, processes and system equipment, and forms an integrated solution of “material+application+device” through the coordination of “software and hardware” with unique adaptability of applied process technology and customized system devices. At present, the company has undertaken hundreds of overall system integration solution projects. The customer area covers domestic, Asia, Europe, Africa, South America, etc., covering many downstream fields such as food processing, plant extraction, salt lake lithium extraction, and biomedicine. The “material+application+device” integrated model has become the engine of the company's performance. The system device achieved revenue of 0.825 billion yuan in 2023, an increase of 76.66% over the previous year, accounting for 33.14% of total revenue, which strongly drives the company's performance growth. Technical services have also maintained an upward trend in the past five years. Revenue increased from 0.001 billion yuan in 2019 to 0.065 billion yuan in 2023.

The new production capacity came at the right time to seize the development opportunities of the industry. At the beginning of 2020, the company put into operation two high-quality production capacity bases, Gaoling Industrial Park and Pucheng New Material Base. The total production capacity increased from less than 0.01 million tons to 0.05 million tons.

In terms of product lines, the two parks each focus and complement each other. The new production capacity is mainly positioned as a high-end high-quality variety of adsorption and separation materials. The product performance is stable, and the special varieties meet customized needs. In addition, as the company successively signed and implemented several industrial salt lake lithium extraction orders, the Salt Lake lithium extraction project gradually became one of the core drivers of the company's performance growth. Revenue grew from 0.183 billion yuan in 2020 to 0.52 billion yuan in 2023, with a CAGR of 41.64%. The production capacity bottleneck also gradually became an important factor limiting the company's further development. In order to break through this bottleneck, in April 2023, the company raised funds to build a metal adsorption and separation material production system expansion project through the issuance of new energy convertible bonds. After the project is completed and put into operation, the company's lithium adsorbent production capacity will increase from 0.003 million tons/year to 0.015 million tons/year, and the production capacity of the system equipment required for the lithium carbonate salt lake lithium extraction project will increase from 0.02 million tons/year to 0.06 million tons/year. In recent years, domestic production capacity and environmental protection requirements in the adsorption and separation materials industry have been upgraded and drastically compressed, compounding the lengthening of the international production capacity supply cycle, and obvious changes in the industry supply and demand pattern. The company grasped this industry window and added production capacity in due course, which helped to further increase the company's product market share and consolidate its dominant position in the industry.

Investment advice: We expect the company to achieve operating income of 3.226/4.037/5.023 billion yuan in 2024/2025/2026, up 29.61%/25.14%/24.44% year-on-year, and achieve net profit of 0.972/1.257/1.574 billion yuan, up 35.59%/29.30%/25.20% year over year. The current stock price corresponding to 2024/2025/2026 PE is 20.83/16.11/ 12.87X, considering that the company is a leading platform-based adsorption material company, the various business segments resonate with a remarkable upward trend, have outstanding growth, and are covered for the first time, giving it a “Highly Recommended” rating.

Risk warning: market competition risk; risk of changes in downstream application areas; risk of loss of core technical personnel and technology leakage.