Performance growth was steady in the first half of 2024, and growth slowed in the second quarter. In the first half of 2024, the company achieved revenue of 0.525 billion yuan (+23.88%), net profit due to mother 0.134 billion yuan (+12.35%), and net profit not attributable to mother of 0.123 billion yuan (+3.13%). Among them, 24Q2 single-quarter revenue was 0.309 billion yuan (+17.65%), net profit attributable to mother was 0.084 billion yuan (flat), and net profit not attributable to mother was 0.074 billion yuan (-12.28%).

The company's performance in the first half of 2024 maintained steady growth. The growth rate slowed in the second quarter, mainly due to increased R&D investment as the company increased the layout of innovative drugs and generic drug self-development projects, and increased competition for traditional generic drug CRO.

The share of self-developed technological achievements transformation business continues to increase. By business, in the first half of 2024, preclinical pharmacy research achieved revenue of 0.11 billion yuan (-9%), clinical services of 0.09 billion yuan (+32%), transformation of R&D technology achievements of 0.29 billion yuan (+52%), equity share of 4.55 million yuan (-73%), CDMO 5.12 million yuan (-70%), and commercial production of 2.5 million yuan. The company transitioned from traditional generic drug contract research and development to independent research and development. The R&D technology achievement transformation business grew strongly. The revenue share increased to 55.2%. Pre-clinical pharmacy research revenue declined, and the share of revenue decreased to 21.6%.

New orders have continued to grow, and breakthroughs have been made in the technological transformation of Class II new drugs. In the first half of 2024, the company added 0.71 billion yuan in new orders, an increase of 13.4% over the previous year. Under the influence of industry restructuring and increased competition, new orders continued to grow. The company adheres to the dual-line development idea of innovative drugs and generic drug research and development, and lays out independent innovative drug research and development projects. Currently, there are 17 innovative drug research and development projects, including 11 small-molecule chemicals and 6 macromolecular biopharmaceuticals, which are widely distributed in key medical fields such as tumors, autoimmunity, neuropsychiatric and respiratory diseases. In the first half of 2024, the company made a breakthrough in the transformation of Class 2 improved new drug technology achievements. It signed a contract with Beijing Yuanfang Tongda Pharmaceutical Technology Co., Ltd. to transfer 70% of the property rights of the Class 2 improved new drug 2022 HY052 with 70 million yuan, and continues to be responsible for the R&D, clinical and production of the product.

Investment advice: Considering the intensification of competition in traditional generic drug CRO and the company's continued increase in R&D investment and lower profit forecasts, the 2024-2026 revenue is expected to be 1.18/1.46/1.75 billion yuan (originally 1.37/1.8/2.29 billion yuan), a year-on-year growth rate of 16%/24%/20%, and net profit to mother of 0.3/0.4/0.5 billion yuan (originally 0.38/0.49/0.65 billion yuan), with a year-on-year growth rate of 12%/32%/25% The current stock price corresponds to PE 13/10/8x, maintaining the “superior to market” rating.

Risk warning: risk of drug development failure; risk of order execution falling short of expectations; risk of regulatory policy.