The company's 2024 mid-year report: In the first half of 2024, revenue was 2.143 billion yuan, a year-on-year decrease of 6.99%; net profit to mother was 0.405 billion yuan, a year-on-year decrease of 35.15%; net profit after deducting non-return to mother was 0.369 billion yuan, a year-on-year decrease of 39.70%. The second quarter of 2024 achieved revenue of 1.138 billion yuan, an increase of 14.27% year on year; net profit to mother was 0.228 billion yuan, a decrease of 22.02% year on year; net profit after deducting non-return to mother was 0.197 billion yuan, a decrease of 29.79% year on year.

24Q2 earnings improved markedly from month to month, and the financial situation was stable.

Profitability improved relatively well: in 24Q2, the company's net profit increased by 28.58% month-on-month; net profit after deducting non-net profit increased 15.11% month-on-month; gross profit margin 41.77% (-6.81pp, +3.28pp); net profit margin 20.01% (-9.32pp, YoY +2.37pp), and profitability showed a month-on-month improvement trend. 24H1, the company's cost rate for the period was 19.57% (+2.39pp), of which the sales/management/development/finance ratio was -4.69/+1.02/+1.59/+4.47pp, respectively. The change in sales expenses was due to a decrease in sales expenses after the collection of domestic heparin preparations. Fluctuations in financial expenses led to a decrease in exchange income, and an increase in R&D expenses. The main company continued to increase biopharmaceutical research and development.

Inventory structure optimization: 24H1, the company's inventory book value is 3.664 billion yuan, including 0.765 billion yuan for raw materials (accounting for 20.89%), 0.731 billion yuan for products (accounting for 19.95%), 2.167 billion yuan for inventory products (accounting for 59.14%). The share of heparin raw materials is relatively low, and the inventory structure is healthy.

Improved operational efficiency: 24H1 inventory turnover days were 549.79 days, a year-on-year decrease of 318.94 days; accounts receivable turnover days was 75.06 days, a year-on-year decrease of 1.59 days.

Heparin raw materials: sales revenue of 0.533 billion yuan, accounting for 24.85% of total revenue, gross profit margin of 29.03%. The company's heparin API business accounted for 20% of total revenue from over 60% in 2019 to 20% in the first half of 2024, reflecting the company's successful transformation from a traditional API supplier to an international sterile injection company. Future fluctuations in the heparin API price cycle will further reduce the disturbance of the company's business.

Formulations: Sales revenue of 1.548 billion yuan, accounting for 72.23% of total revenue, gross profit margin of 44.10%.

Domestic formulations: sales revenue of 0.399 billion yuan, accounting for 18.63% of total revenue. The company's basic heparin formulation products continue to penetrate the domestic market. In addition to collection, the company continues to improve domestic sales channels and operation channels, and expand the market to bring domestic formulation growth.

Foreign formulations: Sales revenue of 1.148 billion yuan, accounting for 53.60% of total revenue, of which US formulation revenue was 0.949 billion yuan, an increase of 17.69% over the previous year, and revenue of non-US formulations was 0.199 billion yuan. The company currently has 100 overseas drug registration approvals. The company combines Meitheal's advantages on the GPO and channel side to ensure a steady increase in overseas sales revenue for formulations.

Globalization of formulations accelerates: 24H1, the company continues to promote product registration and sales expansion in more than 10 countries, including Europe, South America, Central and North America, West Asia, North Africa and other regional markets.

In addition, the company further lays out the Southeast Asian market and will establish a Singaporean subsidiary as a fulcrum for expanding its Southeast Asian business. The company has registered and declared a variety of drugs in Southeast Asian countries, including Singapore, Malaysia, the Philippines, Indonesia, Thailand, Vietnam, etc., and the products have been approved in some countries. Further expansion of these markets is expected to become the company's third development pole outside of the Chinese and American markets. The company's overseas commercialization team has more than 100 people, and has built marketing platforms and achieved direct sales of formulations in North America, Europe, and South America.

The biopharmaceutical growth curve is gradually becoming clear: in terms of biosimilars, during the reporting period, the company purchased ownership of the US FDA approval of YUSIMRY, an adalimumab biosimilar developed by Coherus, and became the first pharmaceutical company in China to receive admission tickets for Adalm biosimilar products. Subsequent pipeline research and cooperation were carried out to further participate in the global biosimilar market. In terms of innovative biological drugs, the company cooperated with world-class teams to further promote the development of the second clinical phase of the orphan drug XTMAB project.

Profit forecast and investment rating: Jianyou Co., Ltd. is a global platform for scarce high-end formulations in China. The impact of heparin API cycle fluctuations on the company's performance has been further reduced, and the Biosimilars+Biologics growth curve has gradually become clear, and it is optimistic about the company's long-term development value. We expect the company's net profit to be 0.91/1.17/1.5 billion yuan in 2024-2026, which corresponds to a PE of 21/16/13 times, maintaining an “incremental” investment rating.

Risk warning: geopolitics, increased competition, fluctuating heparin prices, industry policy changes, R&D sales falling short of expectations, exchange rate fluctuations, etc.