occurrences

The company disclosed the 2024 semi-annual report, achieving revenue of 4.372 billion yuan, a year-on-year decrease of 0.46%; net profit to mother of 0.662 billion yuan, a year-on-year decrease of 6.33%; net profit after deducting 0.735 billion yuan, up 6.31% year on year; single Q2 achieved revenue of 2.323 billion yuan, up 0.68% year on year; net profit due to mother of 0.367 billion yuan, a year-on-year decrease of 17.04%; net profit after deducting non-return to mother of 0.441 billion yuan , a year-on-year increase of 7.05%.

The pharmaceutical industry is growing steadily, and the commercial sector is under pressure

2024H1's pharmaceutical industry revenue was 3.896 billion yuan, up 4.55% year on year. Among them, the revenue of the modern traditional Chinese medicine sector was 3.121 billion yuan, up 3.53% year on year; revenue from the chemical formulation segment was 0.631 billion yuan, up 12.57% year on year. By treatment sector, revenue from cardiovascular products was 2.792 billion yuan, up 6.60% year on year, gross profit margin decreased by 2.10 pp; revenue from anti-tumor products was 0.105 billion yuan, up 20.20% year on year, gross profit margin was 72.25%, up 11 pp year on year; revenue from cold and fever products was 0.184 billion yuan, down 37.39% year on year, mainly due to a drop in sales of Agastache Zhengqi drip pills and pianxinolactone drip pills. The gross profit margin was 64.80%, up year on year 1.62pp; Liver disease treatment products were 0.345 billion yuan, up 17.15% year on year, gross profit margin 80.14%, down 1.12pp year on year.

2024H1's pharmaceutical business revenue was 0.454 billion yuan, down 28.08% year on year.

Strong alliances to stabilize leading position in traditional Chinese medicine research and development

In August 2024, the company issued an announcement. The controlling shareholder, Tianshili Group, and its co-actors transferred 28% of the company's shares to China Resources 39. If the share transfer progresses smoothly and is implemented, the company's controlling shareholder will become China Resources 39, and the actual controller will be changed to China Resources. China Resources 39 has obvious advantages in management, marketing, and policy resources, while Tianshili has advantages in innovative research and development capabilities in traditional Chinese medicine. The two are strong alliances and mutual empowerment, which helps Tianshi Li to consolidate its leading position in modern traditional Chinese medicine research and development and enhance channel competitiveness.

Profit Forecasts, Valuations, and Ratings

We expect the company's 2024-2026 revenue to be 9.186/9.798/10.429 billion yuan, respectively, with year-on-year growth rates of 5.90%/6.67%/6.43%; net profit to mother of 1.183/1.338/1.479 billion yuan, respectively, with year-on-year growth rates of 10.46%/13.08%/10.57%, and EPS of 0.79/0.90/0.99 yuan/share, respectively. Since the company is a leading innovator in modern traditional Chinese medicine, it maintains a “buy” rating.

Risk warning: market and policy risk, R&D innovation risk, raw material price fluctuation risk