Shengnuo Biotech: With GLP-1 series peptide products as the core, the three major business segments are developing collaboratively. Peptide production is characterized by high requirements and high technical barriers. The company is one of the few enterprises with a full industrial chain layout in the field of polypeptide drugs in China. It has rich technical reserves and has a first-mover advantage in the R&D and production of GLP-1 series polypeptide drugs; the company's API and CDMO business continues to grow, and the formulation is expected to achieve sales volume through collection.

The GLP-1 peptide drug market has great potential, and the company's entire industry chain layout has a first-mover advantage. The global peptide market is expanding, and the fields of weight loss and sugar reduction are particularly prominent, and the GLP-1 related peptide drug market has great potential. The company has focused on the field of peptides for many years, is proficient in relevant preparation technology, has a full-process R&D and production platform for peptide raw materials+formulations, and is a pioneer in the field of peptides. With the company's deployment of GLP-1 related drugs such as liraglutide and simeglutide, sales performance is expected to improve.

The expiration of patents and the in-depth layout of peptide drugs continue to accelerate the growth of the company's APIs. In 2014-2022, patents for 11 major peptides, including exenatide and liraglutide, expired. At the same time, the variety of peptide drugs involved in the company continues to increase, the R&D stage continues to expand backwards, and the peptide API market has great potential for future growth.

Various formulations are included in national collection, and it is expected that revenue growth will be achieved through price in exchange for volume. 2024H1's formulation revenue was 0.095 billion yuan. Up to now, the company's atosibane acetate injections and injectable somatostatin have been included in the eighth batch of national collection. As collection continues to advance, the company's formulation side is expected to use the integrated advantages of APIs to exchange price for volume and drive performance growth.

Based on comprehensive advantages such as technology, R&D and production, the company expanded peptide CDMO horizontally. The company has more than 40 pharmaceutical research service projects, of which 1 variety has been approved for marketing and has entered the commercialization stage. In 2017-2023, the company's CDMO revenue increased from 0.05 billion yuan to 0.124 billion yuan. In the future, the three advantages of core technology advantage, business advantage, and cost advantage of integrating R&D and production will continue to support the development of the company's CDMO business.

Profit forecast and investment rating: The impact of formulation collection is clear, and the core business is growing steadily. GLP-1 may be the company's future growth point. We expect the company's net profit to be 0.92, 1.16, 0.151 billion yuan in 2024-2026, and corresponding PE is 31X, 24X, and 19X, respectively. First coverage, giving a “buy” rating.

Risk warning: production capacity expansion falls short of expectations; risk of decline in formulation gross profit; risk of falling short of expected R&D risk, CDMO release falls short of expected risk, API release falls short of expected risk