Performance is growing rapidly. Sansheng Pharmaceutical achieved revenue of 4.389 billion yuan (+16.0%), gross profit of 3.797 billion yuan (+18.6%), and gross margin increased to 86.5% (+1.9pct) in the first half of 2024; the company achieved a net profit of 1.09 billion yuan (+11.1%) and an adjusted net profit of 1.112 billion yuan (+1.5%) from operating income to mother. Business segments such as biopharmaceuticals and hair health have all achieved relatively rapid growth. In the first half of the year, the company's R&D expenses were 0.476 billion yuan (+55.3%), the R&D cost rate was 10.8% (+2.7pct); sales expenses were 1.594 billion yuan (+15.9%), sales expenses were 36.3% (+0.0pct); management expenses were 0.201 billion yuan (-6.2%), and the management expenses rate was 6.2% (-1.1 pct). The company has increased its investment in research pipelines, and R&D expenses have increased.

With Terbiopharmaceutical as the core, sales performance in the biopharmaceutical sector is good. The company's core product, Terbiao, sold 2.476 billion yuan (+22.6%) in the first half of the year, accounting for 66.2% of the market share for thrombocytopenia treatment in China. Ibio and Seibor sold 0.516 billion yuan (+11.3%) in the first half of the year, continuing to dominate the Chinese EPO market. Exaipu sold 0.329 billion yuan (+9.5%) in the first half of the year, and the launch of pre-filled needles further enhanced the competitiveness of EXCEP. Septin sold 0.162 billion yuan (+48.9%) in the first half of the year. In addition, the company's hair growth drug Mandy sold 0.55 billion yuan (+10.0%) in the first half of the year, and Mandy foam was approved for marketing in the first half of the year.

We place equal emphasis on self-development and BD, and work hard in the field of treatment where we have an advantage. Sansei Pharmaceutical has many pipeline development layouts in the fields of nephrology, hematology and oncology, self-immunity, and hair and skin. In the field of nephrology, the marketing application for long-term EPO (SSS06) has been accepted. In the field of hematology and oncology, 707 (VEGF/PD-1 dual antibody) is undergoing phase 2 clinical trials. In the field of self-immunity, phase 3 clinical trials of 608 have been completed and are expected to be declared for sale in the second half of the year; products such as 613, 611, and 610 have already entered phase 3 clinical trials. In the field of hair and skin, the bridging clinical trial with the product Winlevi has begun enrolling patients.

Investment advice: Maintain an “better than the market” rating.

We maintain the company's profit forecast. We expect the company's net profit to be 1.93/2.15/2.42 billion yuan in 2024-2026, up 24.7%/11.4%/12.6% year over year, corresponding to the current stock price PE = 6.9/6.2/5.5. The company has steady growth and a good level of profit. The R&D pipeline is about to enter a harvest period, maintaining a “superior to the market” rating.

Risk warning: The price reduction for core products has exceeded expectations, and the progress of collection has exceeded expectations.