Multiple factors put pressure on the profit side. The 2024H1 company achieved revenue of 0.745 billion yuan, a year-on-year decrease of 11.75%; net profit to mother of 98.69 million yuan, a year-on-year decrease of 13.35%; net profit after deducting non-attributable net profit of 67.61 million yuan, a year-on-year decrease of 37.55%. 2024Q2 achieved revenue of 0.367 billion yuan, down 20.24% year on year; net profit due to mother was 49.21 million yuan, down 12.34% year on year; net profit after deducting non-return to mother was 26.19 million yuan, down 60.68% year on year. Profits are under pressure in the short term due to various factors such as depreciation of new production capacity (current depreciation amount of 62.63 million yuan, up 19.84% year over year) and convertible bond interest expenses (current amount 24.57 million yuan, up 4.17% year over year). The company's on-hand order amount grew steadily, with a year-on-year increase of more than 20%.

2024H1, the number of active customers in the company reached 726, up 8.77% year on year; 137 new customers were added, up 34.31% year on year. Considering the pressure on downstream demand in the industry and the high pressure on the company's cost side, we lowered our 2024-2026 profit forecast. We expect net profit to be 0.2/0.238/0.28 billion yuan (originally estimated 0.233/0.26/0.303 billion yuan) and EPS is 1.00/1.19/1.40 yuan. The current stock price corresponds to PE31.6/26.7/22.6 times, given the steady growth rate of the company's orders in hand.

Strengthen overseas market expansion and continue to promote the MNC procurement system docking process. Product and service revenue in the 2024H1 drug research stage was 0.166 billion yuan, an increase of 0.80% over the previous year. The company focuses on the development and innovation of molecular blocks, and has designed more than 0.2 million molecular blocks. The company continues to strengthen overseas market expansion and improve the regional market layout. 2024H1 has completed the establishment of a Swiss subsidiary, and is currently constructing a European molecular block warehouse and marketing and sales team. At the same time, the company is focusing on the development of end customers. 2024H1 has added procurement systems to two of the world's top 10 pharmaceutical companies, and the number of orders has increased markedly.

CDMO's business continues to empower global customers, and its business capabilities have been further recognized by MNC for product and service revenue of 0.578 billion yuan in the 2024H1 drug development and commercialization stage. The company's project pipeline continues to expand. There are 1,200 pre-clinical to clinical phase II projects, and 35 clinical phase III to commercialization projects.

The company continued to improve CDMO's global layout. Revenue from MNC was 0.216 billion yuan, a year-on-year increase of 45.84%, and the revenue share increased to 29.03%. 2024H1 has received 21 new orders and delivered 11 orders. Overseas customer projects account for nearly 50% of the number of projects. Among them, the formulation CMO project is expected to be converted into commercial orders.

Risk warning: risk of fluctuating orders from major customers, risk of losing customers, production capacity falling short of expectations, etc.