Brief performance review

On August 23, 2024, the company released its 2024 semi-annual report. In 1H24, the company achieved revenue of 1.366 billion yuan, +12.19% year over year; net profit to mother 0.284 billion yuan, +43.77% year over year; net profit after deducting non-attributable net profit of 0.255 billion yuan, +43.24% year over year.

Looking at a single quarter, 2Q24 achieved revenue of 0.775 billion yuan, +8.31% year over year; net profit to mother 0.158 billion yuan, +31.24% year over year; net profit after deducting non-return to mother 0.149 billion yuan, +36.52% year over year.

Management analysis

Harvesting is exchanging price for volume, optimizing sales expenses, and profits continue to grow rapidly. 1H24's loxoprofen sodium gel patch won the bid for some Western medicines and proprietary Chinese medicines in the Beijing-Tianjin-Hebei “3+N” Alliance. The winning bid price was 18.19 yuan/stick. It won the bid for the second batch of drugs in Kunming. The winning bid price was about 17.37 yuan/stick. According to the company's investor relations management information, as of the end of July, 19 loxoprofen sodium gel patches had been collected in 19 areas. We believe that the continuous expansion of the collection area will help the company develop new hospitals and achieve mass distribution of products. In addition, the company's sales expense ratio continued to decline. The 1Q24 sales expense ratio was 40.5% (year-on-year decrease of 5.65pct), and the 2Q24 sales expense ratio was 39.59% (year-on-year decrease of 10.94 pct). Collecting had a remarkable effect on optimizing the sales expenses ratio. We continue to be optimistic that as collection is implemented one after another, product release+sales expense optimization will drive the company's profits to continue to be released.

A variety of products have been declared for production, and the product pipeline reserves are sufficient. The company has declared production of various products, such as riprodicaine cream, lidocaine gel paste, flubiprofen gel patch, and indomethacin gel patch. In the future, it is expected that many of the company's products will be launched one after another, enriching the product pipeline. As a new class 1 traditional Chinese medicine, Jiaoqi Musk Gel Patch obtained a phase III clinical trial summary report at the end of 23, and is expected to become the company's marketing variety in the future.

Profit Forecasts, Valuations, and Ratings

We are optimistic that loxoprofen sodium gel patches will continue to be released, and the company's product pipeline will gradually be enriched, and the performance is expected to continue to grow steadily. The company's net profit for 24-26 is estimated to be 0.514/0.661/0.817 billion yuan, respectively, up 40%/29%/24% year over year, EPS was 1.06/1.36/1.68 yuan respectively, and PE corresponding to the current price was 21/16/13 times, respectively, maintaining the “buy” rating.

Risk warning

Market competition increases risks, risks where product volumes fall short of expectations, risk that R&D progress falls short of expectations, risk that a single product accounts for relatively large risks, and risk of capital dilution by convertible debt-for-equity swaps, etc.