Performance summary: In the first half of 2024, the company achieved revenue of 2.892 billion yuan (+2.94%), net profit of 0.405 billion yuan (+13.18%), net profit of 0.395 billion yuan (+10.44%) after deducting non-return net profit, 26.60% (+1.96pcts), and a net profit margin of 13.98% (+1.28pcts). The profit level exceeded expectations. Of the company's 26 main products, 20 products achieved sales growth, continuous optimization of production processes, and enhanced product competitiveness; prices of major types of pharmaceutical raw materials were stable, and products such as fluphenicol and doxycycline increased their market share.

In terms of cost ratio, sales expense ratio of 1.11% (-0.05pcts), management expense ratio of 5.21% (-0.22pcts), and R&D expense ratio of 3.21% (-0.26pcts) have all remained stable.

Revenue split: 1) By business type, revenue from pharmaceutical raw materials was 1.326 billion yuan, accounting for 46.09%; revenue from key pharmaceutical intermediates was 0.599 billion yuan, accounting for 20.81%; revenue from animal insurance raw materials was 0.739 billion yuan, accounting for 25.69%; and revenue from pharmaceuticals and other drugs was 0.213 billion yuan, accounting for 7.41%. 2) Divided by region, domestic revenue was 1.59 billion yuan, accounting for 55.23%; overseas revenue was 1.288 billion yuan, accounting for 44.77%.

New businesses are developing efficiently, and capacity construction is progressing steadily. In the first half of the year, the company set up an independent management team for specialty APIs; production and sales of the cephalosporin series grew strongly; cooperation projects with key international customers such as Abbott achieved remarkable results in the pharmaceutical semi-formulation business; the key pharmaceutical intermediates business increased exports to the international market, and revenue achieved contrarian growth. In terms of capacity construction, completed fund-raising projects are promoting a continuous increase in production capacity utilization, while technical improvement projects with an annual output of 70,000 tons of key pharmaceutical intermediates and 1,420 tons of pharmaceutical raw material intermediates with an annual output of 1,420 tons of new projects are progressing steadily.

Profit forecast and rating: The company is expected to achieve revenue of 5.734/6.603/7.531 billion yuan in 2024-2026, up 7.2%/15.2%/14.1% year on year; net profit to mother of 0.835/1.039/1.23 billion yuan, up 36.3%/24.4% year on year. Maintaining a “buy” rating based on the gradual improvement of the company's profitability and the continuous enrichment of the API and intermediate product matrix.

Risk warning: risk of product price changes, increased risk of market competition, risk of changes in industry policies, risk of changes in raw material prices