Matters:

The company released its 2024 mid-year report. In the first half of 2024, the company's revenue was 0.532 billion yuan, up 1.83% year on year, and net profit to mother was 0.052 billion yuan, down 38.15% year on year, after deducting non-net profit of 0.048 billion yuan, down 47.47% year on year. In the second quarter of 2024, the company's revenue was 0.27 billion yuan, down 0.23% year on year, and net profit to mother was 0.026 billion yuan, down 45.04% year on year, after deducting non-net profit of 0.023 billion yuan, down 56.85% year on year.

Commentary:

Overseas revenue continues to grow at a high rate, and the share of overseas revenue continues to rise. In the first half of 2024, the company achieved revenue of 0.532 billion yuan, an increase of 1.83% over the previous year. By business line, the company's pharmaceutical molecular block business revenue was 0.455 billion yuan, up 0.22% year on year, and scientific reagent business revenue was 0.077 billion yuan, up 12.57% year on year, mainly because the company continued to increase the development of scientific reagent product lines. Looking at the subregion, the company achieved revenue of 0.299 billion yuan overseas, an increase of 12.68% over the previous year, and the share increased to 56.24%.

The company's gross margin gradually rebounded steadily. Through strategic analysis, the company closely followed market trends and made price policy adjustments to reduce product sales prices to basically the same level as the same market and industry. 2023Q2 gross margin declined month-on-month, then remained stable, and 2024Q2 gross margin increased 1.22 pcts month-on-month compared to 2024Q1.

The results of the company's refined management are gradually showing. In 2023, the company renovated and expanded its regional centers in Germany and India, further consolidating its core advantage of “more, faster, better, and cheaper”, and plans to intelligently lay out US warehouses. In terms of sales, the company actively participated in academic conferences and exhibitions at home and abroad, and its brand influence continued to increase. In terms of research and development, the company has increased the layout of novel drug molecular blocks and core product lines. By the end of the first half of 2024, the company had 0.12 million types of products in stock, which can provide end customers with more than 0.4 million pharmaceutical molecular blocks with novel structures and diverse functions. Sales expenses, administrative expenses, and R&D expenses combined increased 47% in 2023. The company actively carried out detailed management, with remarkable results. The 2024Q1 sales expenses rate and management fee ratio improved markedly from month to month, and the total improvement of the three rates of the 2024Q2 company went further.

In view of market price competition, the company's previous price policy adjustments, and asset depreciation due to inventory price losses, we expect net profit to be 0.135, 0.176, and 0.241 billion yuan (previously predicted values were 0.142, 0.19, and 0.255 billion yuan), respectively, with year-on-year increases of 22.8%, 31.1%, 36.7%, and EPS of 1.48, 1.94, and 2.65 yuan, respectively. According to the Comparable Company Valuation Law, in view of the company's continuous strengthening of its “more, faster, better, and more economical” core competitiveness and continuing to increase its global market layout, it is given 30 times PE over 24 years, with a target market value of 4 billion yuan, and a target price of about 45 yuan. At the same time, referring to the cash flow discount valuation method, conclusions are cross-verified through absolute valuation, and the “recommended” rating is maintained.

Risk warning: 1. Industry demand recovery falls short of expectations; 2. Market competition intensifies; 3. Overseas market expansion falls short of expectations.