Incidents:

Recently, the company released its semi-annual report. In the first half of 2024, the company's revenue was 0.923 billion yuan (+29.60% YoY), net profit attributable to mother was 0.076 billion yuan, and net profit not attributable to mother was 0.055 billion yuan.

Comment:

Losses were reversed year over year in the first half of the year, and operating income increased year over year. In the first half of 2024, the company's revenue increased by nearly 30% year-on-year, and the profit side turned a loss into a profit compared to the same period last year. The main factors in improving performance include the company's rapid sales growth rate of anti-infective and chronic disease products, driving the company's revenue growth and profitability; the company continues to analyze, evaluate and optimize R&D projects, focusing on promoting research and development of key superior varieties. Some new drugs have completed the critical clinical research and development stage with large R&D investment, and related projects do not need to continue large-scale R&D investment, so R&D expenses have decreased year on year; the company has continuously strengthened cost management to optimize various expenses, and the cost control results are remarkable. Product revenue increased at an accelerated pace, cost control was effective, and the company's performance turned a loss into a profit in the first half of the year.

Drug development has a rich heritage, combining simulation and development. Since its establishment, the company has gradually built two major R&D platforms for chemical drugs and biopharmaceuticals. The treatment fields cover the fields of digestion, anti-tumor, anti-infection, and chronic diseases. Since 2024, the company has obtained marketing approval for 5 new generic drugs, including:

Injectable dexlansoprazole, etrapepam ethanolamine tablets, torrimifene citrate tablets, injectable isaconazole sulfate, injectable fosapitane bismethylamine. In terms of innovative drugs, the company focuses on the development of innovative drugs and complex formulations with high barriers. Through independent R&D and introduction cooperation, the company focuses on the research and development of innovative drugs targeting small molecules and innovative cancer immunobiology drugs. The company currently has a total of 48 research projects, including 11 disclosed innovative drugs focusing on chemical and biological innovation. Among them, the innovative anti-tumor drugs ASK120067 tablets (third-generation EGFR TKI) and ASK120067 tablets (c-Met) are in the marketing phase, ASKC109 (maltol iron capsules) and ASKB589 (Claudin18.2 monoclonal antibody) have entered phase III clinical stage, and many innovative drugs are in early clinical and pre-clinical research stages. Up to now, the company has submitted listing applications for 7 publicly available new products. The number of new generic drugs is increasing, and the impact of collecting old varieties continues to clear up; the innovation pipeline continues to advance, and the clinical progress of many products is ahead, and they are about to be marketed. Innovation and simulation combined with development are expected to continue to provide performance increases.

Profit forecast and investment suggestions: The company's drug treatment field mainly covers the four major fields of digestion, anti-tumor, anti-infection, and chronic diseases, and the market space is broad. We expect the company to achieve revenue of 1.619/1.819/2.134 billion yuan in 24-26, with earnings per share of 0.13/0.21/0.33 yuan. This is the first coverage, giving the company an “increase in wealth” rating.

Risk warning: risk of R&D falling short of expectations, risk of sales falling short of expectations, policy risk, etc.