Brief performance review

On August 23, 2024, the company released its 2024 semi-annual report. In 1H24, the company achieved revenue of 4.034 billion yuan, -12.84%; net profit to mother of 1.338 billion yuan, -0.11% YoY; net profit after deducting non-attributable net profit of 1.18 billion yuan, or -5.36% YoY.

Looking at a single quarter, 2Q24 achieved revenue of 1.632 billion yuan, -27.17%; net profit to mother 0.493 billion yuan, -25.64% YoY; net profit after deducting non-attributable net profit of 0.454 billion yuan, or -29.17% YoY.

Management analysis

Despite short-term fluctuations in performance, the quality of profits has improved. The decline in the company's performance in the first half of the year was mainly due to factors such as the high base of respiratory products in the same period last year and rabeprazole sodium enteric capsules being affected by collection. At the same time, the company's sales expense ratio continued to decline. The 1H24 sales expense ratio was 39.91%, a year-on-year decrease of 3.33pct; the net profit margin was 33.17%, up 4.23pct year-on-year, and profit quality was improving.

The BD pipeline continues to advance, and future increases can be expected. On July 23, 2024, Suzhou Yusen Pharmaceutical Development Co., Ltd. and Jichuan Pharmaceutical signed a strategic cooperation agreement in Shanghai. The two sides plan to carry out a series of in-depth cooperation in the development of innovative traditional Chinese medicine drugs, particularly in the fields of children, breathing, gynecology, and digestion. This cooperation is expected to further increase the company's product reserves. On February 8, 2024, the marketing application for ZX-7101A for the treatment of uncomplicated influenza in adults was officially accepted by the CDE, and clinical trials for other indications of this product are also ongoing. Related BD products, represented by ZX-7101A, are expected to bring significant performance increases to the company if successfully marketed and promoted in the future.

Profit Forecasts, Valuations, and Ratings

We are optimistic about the company's long-term development prospects. Based on the current development situation, the company's net profit for 24-26 was lowered from 3.029/3.492/3.842 billion yuan to 2.902/3.205/3.577 billion yuan, up 2.8%/10.4%/11.6% year on year, EPS was 3.15/3.48/3.88 yuan, corresponding PE was 11/10/9 times the current price, maintaining the “buy” rating.

Risk warning

The risk that the product approval process falls short of expectations, the risk that the BD acquisition falls short of expectations, the risk of product collection price reduction, etc.