Incident: Tianshili released its 2024 semi-annual report. During the reporting period, it achieved revenue of 4.372 billion yuan (YoY -0.46%), net profit of 0.662 billion yuan (YoY -6.33%), net profit not attributable to mother of 0.735 billion yuan (YoY +6.31%); the company achieved operating income of 2.323 billion yuan (YoY +0.49%), net profit to mother of 0.367 billion yuan (YoY -16.76%), net profit not attributable to mother 0.441 billion yuan (+7.05% YoY), the performance was basically in line with expectations.

The revenue side remained stable. By industry, the 2024H1 pharmaceutical business achieved revenue of 0.454 billion yuan (-28.08%); the pharmaceutical industry achieved revenue of 3.896 billion yuan (+4.55%), and its central cerebrovascular, anti-tumor/cold fever/liver disease treatment/others achieved revenue of 27.92/1.05/0.184/0.345/0.471 billion yuan, respectively, +6.60%/+20.20%/+17.15%/+8.77%. Revenue from cold and fever products declined compared to the same period last year, mainly due to a decline in sales of Agastache Zhengqi drip pills and pianxinolactone drip pills.

Interim dividends give back to shareholders. According to the 2024 semi-annual profit distribution plan, the company plans to distribute a cash dividend of 2.6 yuan (tax included) to all shareholders for every 10 shares. Based on the total share capital of the company on June 30, 2024, it is proposed to distribute a discovery dividend of about 0.388 billion yuan (tax included). This dividend accounts for 58.65% of the net profit attributable to shareholders of listed companies in the company's consolidated statements for the first half of the year.

The controlling shareholder will be changed to China Resources 39, and strong partners will promote high-quality development. On August 4, 2024, Tianshili Group, the controlling shareholder of the company, and its co-actors signed a “Share Transfer Agreement” with China Resources 39 Pharmaceutical Co., Ltd. If the share transfer is successfully completed, the controlling shareholder of the company will become China Resources 39. Through the support of China Resources 39 in terms of management, marketing and policy resources, Tianshili will rapidly enhance its competitiveness in multiple dimensions, enhance the company's value and return on investment to public shareholders.

Give it an “gain” rating. The estimated net profit for 2024-2026 is 1.174/1.292/1.43 billion yuan, up 9.6%/10.0%/10.7% year-on-year, EPS is 0.79/0.86/0.96 yuan, and the corresponding PE is 17.2/15.6/14.1x, respectively. Considering that the company has strong R&D strength, brand power and mature marketing system, it will join forces with China Resources's top 39 to give it an “increase in weight” rating.

Risk warning: R&D innovation risk, controlling shareholder change risk, policy risk, cost fluctuation risk.