Revenue and net profit grew rapidly. With 2024H1, the company achieved revenue of 1.19 billion yuan (+31.7% year over year), mainly benefiting from the continuous popularization of the clinical cure concept of hepatitis B and the accumulation of scientific evidence. The company's core product Pegbin continued to be released; net profit to mother was 0.304 billion yuan (+50.5% year over year), after deducting net profit of 0.33 billion yuan (+41.7% year over year).

On a quarterly basis, 2024Q1/Q2 achieved revenue of 0.545/0.645 billion yuan (+30.1%, +18.2%, respectively), net profit to mother of 0.129/0.176 billion yuan (+53.0%/+48.8%, +36.3%, respectively), net profit excluding non-attributable net profit of 0.146/0.184 billion yuan (+42.9%/+40.7%, month-on-month, respectively).

The gross and net margin increased steadily, and the sales expenses ratio continued to improve. 2024H1, the company's gross margin was 93.4% (YoY +0.4pp), net profit margin 25.6% (YoY +3.2pp); sales expense ratio was 42.0% (YoY -3.7pp), management expense ratio 10.0% (YoY +0.8pp), R&D expense ratio 9.6% (YoY +1.0pp), financial expense ratio -0.1% (Y+0.1pp), and the overall cost ratio for the period was 61.5% (YoY -1.8pp).

The 2024 equity incentive plan was announced, demonstrating confidence in long-term development. The company plans to award 6 million restricted shares to a total of 667 incentive recipients (mainly directors, senior managers, and core technical personnel, accounting for about 34.5% of the company's total number of employees). The plan is divided into 3 vesting periods. The assessment year corresponds to 2024-2026, with 2023 net profit as the base (0.555 billion yuan), the net profit growth rate from 2024 to 2026 was not less than 30%/70%/120%, respectively, and the corresponding net profit was not less than 0.722/0.944/1.221 billion yuan, respectively, and the corresponding compound growth rate was 30%. Among them, the total estimated amortization fee for 4.8 million restricted shares granted for the first time is 48.456 million yuan, and the impact on accounting costs from 2024 to 2027 is 775.1/23.039/12.403/5.263 million yuan, respectively.

Investment suggestions: The company's core product, Pegbin, is currently the only long-term interferon product in China. The domestic population of chronic hepatitis B patients is huge. With the continuous spread of clinical treatment concepts for hepatitis B and the accumulation of scientific evidence, the penetration rate of combination therapy based on long-term interferon is expected to continue to increase; Pekin is a new generation of long-term whitening drugs, which is expected to contribute to sales growth; long-term growth hormone has been submitted to the NDA, leading domestic progress. We maintain our previous profit forecast. We expect that in 2024-2026, the company's revenue will be 2.809/3.672/4.699 billion yuan, and net profit to mother will be 0.75/1.07/1.477 billion yuan, respectively. Currently, the PE corresponding to the stock price is 30/21/15x, respectively, maintaining the “superior to the market” rating.

Risk warning: risk of valuation, risk of profit forecasting, risk of failure in product development under development, risk of product commercialization falling short of expectations, etc.