Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 20.97 billion yuan, up 2.8% year on year; net profit of 1.7 billion yuan to mother, up 18.3% year on year; net profit after deducting 1.63 billion yuan, up 13.9% year on year; 24Q2 company achieved revenue of 10.55 billion yuan, up 2.8% year on year; net profit due to mother of 0.83 billion yuan, up 22.9% year on year; net profit without return to mother of 0.79 billion yuan, a year-on-year increase of 17.5%.

Pharmaceutical industry: Maintaining steady growth and continuing to enrich the product pipeline. In 2023, the core subsidiary China and America Huadong achieved revenue of 6.7 billion yuan (including CSO business, +10.6%); net profit to mother of 1.39 billion yuan (+11.5%); and return on net assets of 12.3%. The industrial microbiology segment achieved sales revenue of 0.29 billion yuan (+27.4%). The company focuses on the three major fields of endocrinology, immunity and oncology. It implements a “self-development+introduction” strategy, accelerates innovative projects and external mergers and acquisitions, and expands the product pipeline. As of 2024H1 has a pipeline of more than 70 innovative products, and innovation and transformation are progressing steadily: 1) Oncology field: new ADC drug ELAHERE? The Chinese marketing license application is currently under review. In March 2024, the US changed from accelerated approval to full approval. In April 2024, it was approved to join the international multi-center PSOC (platinum-sensitive ovarian cancer) phase III clinical study to promote frontline treatment of ovarian cancer. Combined with bevacizumab for FRα-positive recurrent platinum-sensitive epithelial ovarian cancer, fallopian tube cancer, or primary peritoneal cancer patients with 1L platinum-containing chemotherapy have already been applied for maintenance treatment; the application for mehuatinib tablets for 1L EGFR-sensitive mutations has already been marketed in 202 Accepted in 4/5; The company's first self-developed ADCHDM2005 (ROR1) Chinese and American IND applications for the treatment of advanced malignant tumors were approved in June 2024, and the first Chinese clinical case was enrolled in August; the Chinese IND application for the company's first self-developed small molecule anti-tumor drug HDM2006 (HPK-1 PROTAC) was accepted in August 2024 for the treatment of advanced solid tumors; the Chinese IND application for the innovative ADC HDM2027 (HDP-101) introduced by the company was accepted in August 2024 for Treat BCMA-positive clonal hematologic diseases (such as relapsed/refractory multiple myeloma). 2) Endocrine field: As of August 2024, the oral small molecule GLP-1 receptor agonist HDM1002 has completed all phase II clinical enrollment for overweight or obese people. It is expected that 2024Q4 will obtain top-line results, and has also completed the enrollment of the first diabetic phase II patient; the GLP-1R/GIPR dual-target agonist HDM1005 is used for overweight or obesity. Clinical trials of type 2 diabetes are currently progressing smoothly in China. It is expected that 2024Q4 will obtain phase Ia and phase Ib clinical trials Topline results are also scheduled to start phase II clinical trials in early 2025; the FGF21R/GCGR/GLP-1R three-target agonist DR10624 is undergoing phase IB/IIa clinical trial of obesity with hypertriglyceridemia in New Zealand, which is expected to be completed by the end of 2024. At the same time, domestic phase II clinical trials for hypertriglyceridemia have already started, and it is expected that the first case will be enrolled by the end of 2024. 3) Self-defense field: ARCALYST? The Chinese NDA application for recurrent pericarditis (RP) was accepted and included in priority review in December 2023. Currently, marketing applications for cyclic syndrome (CAPS) and RP indications related to cold pyrine are in the process of being reviewed; the NDA application for the usinumab biosimilar HDM3001 (QX001S) for the treatment of plaque psoriasis is currently under review.

Medical and aesthetic sector: The medical and aesthetic sector has performed well, and global expansion has achieved remarkable results. 2024H1's medical and aesthetic sector achieved revenue of 1.35 billion yuan (excluding internal offsetting factors +10.1%), and sales revenue of the British Sinclair subsidiary reached 0.57 billion yuan (-14.8%), which declined due to weak global economic growth and phased demand fluctuations in the EBD business; the domestic medical and aesthetic business achieved revenue of 0.62 billion yuan (+19.8%). As of 2024H1, the company has 40 “non-invasive+minimally invasive” high-end products in the medical and aesthetic field, of which 26 have been launched. Supplementary registration information for the optical radiofrequency therapy device V20 was submitted on July 2, and is expected to be approved domestically in 2024; the MailiExtreme registration application was accepted in April 2024 and is expected to be approved domestically in 2025; MaiLi Precise completed the enrollment of all clinical trial subjects in China at the end of April 2024; Ellansé? The new indication for type S completed the first clinical trial in China in May 2024; Lanluma? The first patient enrollment was completed in June 2024, and a national multi-center registered clinical study is currently being carried out; Ellansé? Type M completed the clinical trial in China in June 2024. All subjects were followed up for 12 months. The pace of internationalization of the company's medical and aesthetic sector has accelerated, and product registration and market expansion have achieved remarkable results, laying a solid foundation for the company's long-term growth strategy.

Profit forecasting and investment advice. EPS is expected to be 1.89 yuan, 2.16 yuan, and 2.42 yuan respectively in 2024-2026, with corresponding valuations of 16 times, 14 times, and 12 times, respectively, maintaining a “buy” rating.

Risk warning: the risk that the clinical and commercialization progress of developing or introducing innovative products falls short of expectations; the competitive pattern of products increases the risk; the risk that the price reduction in the collection of generic drugs exceeds expectations; the risk of overseas operations and exchange rate fluctuations; the risk of policy risks and medical accidents in the medical and aesthetic industry.