Incident: The company recently released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 4.034 billion yuan, a year-on-year decrease of 12.84%; net profit after deducting 1.18 billion yuan, a year-on-year decrease of 5.36%; Q2 achieved revenue of 1.632 billion yuan, a year-on-year decrease of 27.17%; and deducted non-net profit of 0.454 billion yuan.

Short-term performance is under pressure, and sales efficiency continues to improve: the main reasons for the decline in the company's sales revenue in the first half of 2024:1) respiratory products had a high base in the same period last year; 2) rabeprazole sodium enteric capsules were affected by pharmaceutical collection and other factors. The company's 24Q2 sales expense ratio was 38.0%, down 2.7 and 3.2 pct from year to month, respectively. The company's marketing efficiency continued to improve, and the sales platform advantage was stable.

Pipelines are abundant and progressing steadily, providing momentum for long-term development: in the first half of 2024, the company's products fexofenadine hydrochloride dry suspension and levofloxacin sodium chloride injection were approved for production. Nimodipine injections and alanyl glutamine injections passed the consistency evaluation, and concentrated solutions for sodium valproate injections (increased specifications) and rabeprazole sodium raw materials were approved; Prunstel dry syrup and lidocaine gel paste completed registration declarations.

Investment proposal: We expect the company to achieve operating income of 10.085/11.082/12.236 billion yuan and net profit to mother of 3.048/3.446/3.954 billion yuan in 2024-2026. The corresponding PE was 10.06/8.90/7.75 times, respectively, maintaining the “buy” rating.

Risk warning: risk of price reduction in collection, risk of sales promotion falling short of expectations, industry policy risk.