Event: Company releases 2024 semi-annual report:

Performance growth was steady, and Pegbin continued to expand. 1H24 achieved revenue of 1.19 billion yuan, a year-on-year increase of 31.68%. Among them, 1Q24 earned 0.545 billion yuan (yoy +30.05%) and 2Q24 earned 0.645 billion yuan (yoy +33.09%). Steady revenue growth is mainly due to the continuous popularization of the clinical cure concept for hepatitis B, driving the company's core product Pegbin to continue to be released.

Expense rates continued to decline, and profit growth was excellent. 1H24 achieved net profit to mother of 0.304 billion yuan, a year-on-year increase of 50.53%. Among them, 1Q24 profit was 0.129 billion yuan (yoy +53.03%) and 2Q24 profit 0.176 billion yuan (yoy +48.75%). The significant increase in profit was mainly due to the continuous increase in the company's net interest rate. 1H24's net profit margin was 25.58%, up 3.20 pct year on year; gross profit margin was 96.36%, up 0.43 pct year on year; sales expenses ratio was 42.00%, down 3.71 pct year on year. We think the main factors were the scale effect brought about by Gobin's sales expansion; management expense ratio of 10.04%, and R&D expense ratio of 9.57%, a slight increase over the previous year.

Clinical development continues to advance, and progress with many results is impressive. 1) In March 2024, Pegbin's marketing application for new indications for clinical treatment of hepatitis B was accepted. Currently in the technical review stage, we expect 1H25 to be approved; 2) The company's long-term growth hormone marketing application was accepted in January 2024 and is currently in the technical review stage; 3) The company's long-term EPO has completed phase II clinical trials and is currently preparing the phase III clinical application; 4) In July 2024, the company signed an agreement with Aligos to jointly develop the oral small molecule capsid assembly regulator ALG- 000184;

The company released the 2024-2026 equity incentive plan, demonstrating management confidence. The company plans to grant 6 million restricted shares at a price of 39.80 yuan per share to a total of 677 directors, executives, core technical personnel and other personnel (accounting for 34.54% of the company's total number of employees at the end of 2023). The company-level assessment requires incentive targets to achieve growth of no less than 30%, 70%, and 120% based on 2023 net profit (0.555 billion yuan) within the three ownership periods of 2024-2026, corresponding to annual growth rates of 30%, 31%, 29%, and CAGR of 30%.

Profit forecast. We forecast the company's net profit for 2024-2026 to be 0.751, 1.051, and 1.438 billion yuan, respectively, up 35.3%, 39.8%, 36.8% year-on-year, and EPS of 1.85, 2.58, and 3.53 yuan respectively.

Referring to comparable companies, we gave the company a rating of 1-1.3 times PEG, corresponding to 37-48 times PE in 2024, and a corresponding reasonable value range of 68.62-89.20 yuan.

Risk warning: Risk of R&D innovation falling short of expectations; risk of industry policy; increased risk of market competition.