Revenue declined slightly, and gross margin increased year on year, maintaining the “buy” rating company 2024H1 to achieve revenue of 4.372 billion yuan (-0.46% year over year, all below); net profit to mother of 0.662 billion yuan (-6.33%); net profit not attributable to mother of 0.735 billion yuan (+6.31%). In terms of profitability, 2024H1 gross margin was 67.46% (+1.28pct) and net margin was 14.94% (-0.70pct). On the cost side, the 2024H1 sales expense ratio is 33.62% (+0.02pct); the management expense ratio is 3.46% (-0.12pct); the R&D expense ratio is 8.47% (+0.46pct); and the financial cost ratio is -0.03% (-0.20pct). We are optimistic about the potential growth space brought about by the company's promotion of innovative research and development, and maintain the 2024-2026 net profit forecast. The forecast is 1.183/1.279/1.38 billion yuan, EPS is 0.79/0.86/0.92 yuan/share, and the current stock price is 17.1/15.8/14.6 times PE, respectively, maintaining a “buy” rating.

Revenue growth in the pharmaceutical industry sector is steady. Looking at product sales in multiple fields, the pharmaceutical industry sector's revenue is 3.121 billion yuan (+3.53%), chemical pharmaceutical revenue 0.631 billion yuan (+12.57%), chemical raw materials revenue 0.037 billion yuan (+3.90%), biopharmaceuticals revenue 0.107 billion yuan (-7.75%); pharmaceutical business sector, revenue 0.454 billion yuan (-28.08%). By treatment area, cardiovascular revenue was 2.792 billion yuan (+6.60%), anti-tumor revenue was 0.105 billion yuan (+20.20%), cold fever revenue was 0.184 billion yuan (-37.39%), liver disease treatment revenue was 0.345 billion yuan (+17.15%), and other types of revenue were 0.471 billion yuan (+8.77%).

Deepen innovation in R&D pipelines and promote high-quality development of the company

The company has stepped up R&D and innovation efforts. Through the “four in one” R&D model, the company has a pipeline covering 101 products under development, including 40 Class 1 innovative drugs, and 25 are in clinical phase II and III stages, steadily promoting the progress of research and development of modern traditional Chinese medicine, biopharmaceuticals, and chemical drugs. Among them, 2 classic traditional Chinese medicine loquat lung cleansing drink and warm jingtang are in the production stage and have passed the drug registration development and production site verification; 19 innovative traditional Chinese medicine products are in clinical phase II and III research stages, including relief drops, spinal pain tablets, etc.; the chemical drug dapoxetine hydrochloride tablets received drug registration approval, and nicordil tablets and ketotifen fumarate tablets passed the consistency evaluation; the biopharmaceutical Puyouke submitted a production application for acute ischemic stroke, and was approved for clinical injection of human umbilical cord interstitial stem cells pieces.

Risk warning: Risk of policy changes, new product development progress falling short of expectations, risk of fluctuations in product raw material prices.