Incident: The company released its 2024 semi-annual report, achieving operating income of 0.405 billion yuan (-10.16%), net profit attributable to shareholders of listed companies of 79.2 million yuan (-14.73%), and deducted non-net profit attributable to shareholders of listed companies of 74.5 million yuan (-12.18%).

Actively changing the sales model, short-term sales of core products are under pressure. In 2024, the company began marketing transformation, and sales of core products fluctuated to a certain extent. In the first half of 2024, “Suling” (injectable viper hemagglutinin) achieved revenue of 0.275 billion yuan (-11.01%), and “migaxin” (salmon calcitonin injection and nasal spray) revenue of 0.13 billion yuan (-3.05%). At present, the company has implemented marketing transformation and empowered affiliate dealers in more than 10 selected provinces. We believe that as marketing transformation progresses, the company's core products are expected to gradually resume growth.

Innovative drug development is progressing steadily, and clinical results are in line with expectations. The company's innovative drug research and development is progressing steadily.

The KC1036 phase III clinical study on the treatment of advanced esophageal squamous cell carcinoma was completed in February 2024 and is currently progressing smoothly; the clinical phase III results of the traditional Chinese medicine class 1.2 innovative drug ZY5301 are in line with expectations, and the marketing application process is being promoted in an orderly manner; the registration application for hemothrombin for dogs was accepted in 2023, and related studies are being added as required.

Profit forecasting and valuation. According to the business situation in the first half of 2024, we adjusted the profit forecast. We expect the company's revenue from 2024 to 2026 to be 0.952 billion yuan, 1.068 billion yuan, and 1,230 million yuan, respectively, with year-on-year growth rates of 3.5%, 12.1%, and 15.2%, respectively; net profit to mother is 0.158 billion yuan, 0.189 billion yuan, and 220 million yuan, respectively, with year-on-year growth rates of 4.9%, 19.6%, and 16.6%, respectively, on September 5 Based on the daily closing price, the corresponding PE was 22.6 times, 18.9 times, and 16.2 times, respectively, maintaining the “buy” rating.

Risk warning: The price reduction in the “Su Ling” medical insurance renewal negotiations exceeded expectations; the progress of new product release/approval was lower than expected; and the marketing model reform effect fell short of expectations.