Brief performance review

On August 22, 2024, the company released its 2024 semi-annual report. 1H24 revenue/return/deducted non-net profit was 0.831/0.227/0.229 billion yuan respectively, up 107%/443%/433% year-on-year respectively; 2Q24 revenue/return/deducted non-net profit was 0.475/0.167/0.164 billion yuan, respectively, up 147%/698%/672% year-on-year respectively. Performance was better than expected.

Management analysis

Forward-looking layout technology and production lines, peptide production lines continue to gain strength, and performance has grown explosively.

(1) Performance: The company's 1H24 revenue doubled, net profit to mother increased 7 times; comprehensive gross margin reached 67.32%, another record high for the company.

(2) Certification and production line: The company successively obtained FDA DMF First Approval Letters for APIs such as liraglutide and simeglutide in 2023. In February 2024, the company obtained the world's first US FDA DMF for tirpotide APIs. In terms of production capacity: ① The new 601 peptide workshop was capped ahead of schedule. It is expected that the installation and commissioning will be completed by the end of 2024 to achieve a peptide production capacity of 5 tons/year. The new 602 peptide workshop is expected to complete construction, installation and commissioning in the first half of 2025, and will release another 5 tons/year of peptide production capacity; ② Launch a large-scale peptide and technological upgrade project to add a higher tonnage of high-quality peptides; ③ The hard capsule production line in the oral solid formulation workshop of the new formulation factory will pass the pharmaceutical GMP compliance test in July this year to achieve phosphoric acid ophosphate compliance testing Varieties of preparations such as tamivir capsules 4.5 Annual production capacity of billion granules.

④ The second phase of the new formulation plant construction project was launched, which will enhance the company's production capacity for injections and freeze-dried powder injections; ⑤ Forward-looking layout and development of oligonucleotide production capacity. The project progressed smoothly, and the 705 workshop was capped.

(3) Technical barriers and order expansion: The company's single-batch production of many long-chain modified peptide drugs such as simeglutide has exceeded 10 kg, and the yield and quality are at the advanced level of the industry.

Delivery of the CDMO long-term supply contract with a total contract amount of 0.102 billion US dollars signed by the company with a major European pharmaceutical company in May 2023 began in the second quarter of this year. It is expected that the pace of delivery will be greatly accelerated from the second half of this year. During the reporting period, the company developed and undertook a number of CDMO innovative drug API projects. With the gradual release of Phase II GMP production capacity, the business chain was steadily continued to the backend with higher stickiness and added value. The company has cooperated on various innovative drug peptide projects in Europe, North America, South America, India and domestic markets.

Profit Forecasts, Valuations, and Ratings

We maintain our profit forecast. We expect the company's 2024/25/26 revenue of 2.4/4/5.5 billion yuan; net profit to mother of 0.5/0.9/1.3 billion yuan. Maintain a “buy” rating.

Risk warning

Risks such as increased competition, failure to develop new drugs or sales falling short of expectations, and exchange rate fluctuations.