Profit increased slightly, and the sales expense ratio declined. Maintaining a “buy” rating of 2024H1, the company achieved operating income of 6.282 billion yuan (-6.09% year over year, not marked as a year-on-year scale); net profit to mother of 1.171 billion yuan (+3.21%); net profit of 1.155 billion yuan (+5.65%) after deducting non-attributable net profit. The company's 2024H1 gross profit margin was 65.96% (+1.87pct); net margin was 21.56% (+4.01pct). 2024H1 company sales expense ratio 27.69% (-1.72pct); management expense ratio 5.27% (+0.62pct); R&D expense ratio 7.81% (-1.32pct).

We are optimistic about the company's market advantage in various treatment fields and maintain the 2024-2026 net profit forecast. The estimated net profit forecast is 2.188, 2.466, and 2.769 billion yuan, respectively, and EPS is 2.36, 2.66, and 2.99 yuan/share, respectively. The current stock price corresponds to PE of 15.9, 14.1, and 12.6 times, respectively, maintaining a “buy” rating.

The revenue performance of sex stimulants is impressive. Looking at the steady growth of psychoactive products by sector, the revenue of 2024H1 chemical products was 3.224 billion yuan (-7.37%), accounting for 51.32%. Among them, revenue from digestive tract products was 1.301 billion yuan (-19.96%), accounting for 20.71%; revenue from sexotropic hormones was 15.49% (+12.51%), accounting for 24.65%; revenue from psychiatric products was 0.297 billion yuan (+6.68%), accounting for 4.72%; anti-infective and other income was 0.078 billion yuan (-61.23%), accounting for 1.24%; 2024H1 biological products revenue was 87.55 million yuan (-22.80%), accounting for 1.39%; Revenue from 2024H1 APIs and intermediates was 1.761 billion yuan (-1.16%), accounting for 28.03%; revenue from 2024H1 traditional Chinese medicine preparations was 745.01 million yuan (-21.89%), accounting for 11.86%; and revenue from 2024H1 diagnostic reagents and equipment was 0.394 billion yuan (+32.33%), accounting for 6.28%.

Accelerate research and development of differentiated innovation pipelines and comprehensively enhance product competitiveness The company is progressing steadily in the research pipeline: injectable triprarelin acetate microspheres (1-month sustained release) has been approved for marketing in 2023, supplementary data for endometriosis have been submitted, clinical trials have been initiated for central precocious puberty; injectable aripiprazole microspheres (1-month delayed release) have been declared for production in 2023. Recombinant human follicle-stimulating hormone injection completed the phase III clinical trial at the end of March 2024; the use of simeglutide injection for type II diabetes has been reported; preparations for phase III clinical trials of weight loss indications are in progress; recombinant anti-human IL-17A/F humanized monoclonal antibody injection officially launched the psoriatic phase III clinical trial in August 2023, and ankylosing spondylitis also completed enrollment of all phase III clinical subjects in early July 2024.

Risk warning: risk of changes in industry policy, risk of new drug development, risk of raw material supply and price fluctuations, etc.