occurrences

On August 28, the company released its 2024 semi-annual report. 2024H1 achieved operating income of 11.827 billion yuan, a year-on-year increase of 9.52%, net profit of 1.8 billion yuan, a year-on-year increase of 28.24%, after deducting non-net profit of 1.753 billion yuan, a year-on-year increase of 29.78%, and EPS of 1.15 yuan/share.

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The infusion product structure continues to be optimized, and new products+collection are expected to drive performance growth. 24H1's infusion sales revenue was 4.667 billion yuan, down 7.15% year on year; sales volume was 2.161 billion bottles/bag, up 0.26% year on year. The main reason for the decline in revenue was due to the impact of basic infusion volume price procurement, and price adjustments for some of the company's infusion product terminals. The proportion of 24H1 sealed infusion volume increased by 3.11 pct, and the structure continued to be optimized. Looking ahead to the second half of the year, seasonal factors in Q4 are expected to lead to an increase in demand for large infusions, and the continued release of collected and negotiated products is expected to improve performance. Sales revenue of non-infusion drugs was 2.02 billion yuan, an increase of 6.38% over the previous year, mainly benefiting from the volume of collected products.

API intermediates have achieved remarkable results in reducing costs, and synthetic biology has entered a period of fulfillment. The company continues to promote process optimization, energy saving and cost reduction. The company's cost advantage continues to show. At the same time, benefiting from growing market demand, the company's main products have risen sharply in volume and price. 24H1's antibiotic intermediates and APIs achieved operating revenue of 3.273 billion yuan, an increase of 38.09% over the previous year. Among them, erythromycin thiocyanate achieved revenue of 0.932 billion yuan, up 28.00% year on year; cephalosporin intermediates achieved revenue of 0.75 billion yuan, up 42.70% year on year; and penicillin intermediates achieved revenue of 1.301 billion yuan, up 33.24% year on year. Synthetic biology is expected to become a new growth point. Currently, many products such as bisabolol, 5-hydroxytryptophan, ergothione, and ecdoine have entered the production and sales stage, and new products are expected to continue to contribute to growth.

Innovative drug pipeline catalysts are abundant, and commercialization of various core ADC pipelines is imminent. 1) SKB264 is expected to become the first domestically marketed TROP2 ADC. The 3L+ TNBC monotherapy has remarkable curative efficacy and is expected to be approved in 2024; 2L+ HR+/HER2- BC indications have the potential to be best-inclusive of terminal monotherapy. 2) A166 (HER2 ADC) 3L+ HER2+ breast cancer is expected to be approved for marketing in 2024-2025. 3) Through the cooperative arrangement of tumor+self-immunity, A166 (PD-L1) and cetuximab analogues are expected to be approved for marketing in 2024-2025, and A400 (RET inhibitor) is expected to be declared for marketing in 2024.

Investment advice

The company's revenue for 2024/2025/2026 is 23.335/25.756/28.656 billion yuan, up 8.77%/10.38%/11.26% year over year. Net profit to mother was 2.904/3.298/3.821 billion yuan, up 18.22%/13.59%/15.86% year over year. The corresponding 2024-2026 EPS was 1.81 yuan/share, 2.06 yuan/share, and 2.39 yuan/share, respectively, with price-earnings ratios of 17 times, 15 times, and 13 times, respectively, maintaining a “buy” rating.

Risk warning

Industry policy risks; drug development and marketing falling short of expectations; product sales falling short of expectations; risk of increased competition; environmental risk.