Jianyou Co., Ltd. published its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 2.143 billion yuan, -6.99%; net profit to mother 0.405 billion yuan, or -35.15% year-on-year; net profit after deducting non-return to mother 0.369 billion yuan, or -39.70% year-on-year.

Looking at Q2 alone, the company achieved revenue of 1.138 billion yuan, +14.27% year over year; net profit to mother was 0.228 billion yuan, or -22.02% year over year; net profit after deducting non-return to mother was 0.197 billion yuan, -29.79% year over year.

Opinion: Heparin APIs are under pressure. I am optimistic that macromolecule exports will create a second growth curve. The revenue side declined slightly, mainly due to the decline in API sales, but Q2 achieved a 13.35% month-on-month increase compared to Q1. At present, the share of revenue in the heparin API business has dropped from more than 60% in 2019 to 24.85% at present, and the business structure continues to improve; in addition to the impact of API sales, financial expenses increased by 0.102 billion yuan year on year, mainly due to exchange rate changes.

By sector, 2024H1's API revenue was 0.532 billion yuan, accounting for 24.85% of revenue; foreign formulation revenue was 1.148 billion yuan, accounting for 53.60% of receivables; of these, the US subsidiary Meitheal achieved operating income of 0.949 billion yuan; domestic formulation sales revenue was 0.399 billion yuan, accounting for 18.63% of revenue; and other operating income was 62.57 million yuan, accounting for 2.92% of revenue.

In terms of financial indicators, R&D investment in the first half of 2024 was 0.191 billion yuan, accounting for 8.91% of revenue; sales expenses were 0.143 billion yuan (YoY) -45.42%, sales expense ratio 6.66% yoy -4.69pp; R&D expenses 0.174 billion yuan (YoY) +15.60%, R&D expenses rate 8.14% yoy +1.59pp; management expenses: 86.15 million yuan (YoY) +24.63%, and management expenses rate 4.02% yoy +1.02pp. Net cash flow from operating activities was $0.606 billion, -3.80% YoY.

By establishing product clusters, high-standard production systems, and rich sales channels, the company's pharmaceutical export business has formed a moat. Based on the American Meitheal team, the company's product pipeline covers the main varieties in the North American market. It can directly face GPO, IDN/PN, and the three major North American wholesalers, and maintain long-term stable cooperation. As the varieties under development continue to be approved for marketing in North America, the future sales of sterile injections in North America will become an important growth point for the company's business.

In other regions of the world, selected high-quality markets in Europe will gradually penetrate, and registration will be promoted at an accelerated pace in other markets.

Currently, the 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; it will further lay out the Southeast Asian market and establish related subsidiaries to jointly promote the rapid growth of the company's overseas formulations.

Promote macromolecular transformation and enter the global market for biosimilar drugs and complex formulations. 2024H1 became the first pharmaceutical company in China to obtain admission tickets for Adalimu biosimilar products by purchasing ownership of the US FDA approval of YUSIMRY, an adalimumab biosimilar drug developed by Coherus and all patents and non-patented technologies and assets related to this drug covered by it. The company participated in the US biosimilar market with well-known international pharmaceutical companies such as Boehringer Ingelheim, Amgen, Sandoz, and Biocon. The company has cooperated with outstanding domestic companies on various products, including the three types of insulin, albumin, paclitaxel, etc., to achieve breakthroughs in the field of biopharmaceutical analogues and complex formulations. The US biosimilar market will become more and more booming in the next 5-10 years, and the company is expected to take advantage of years of deep cultivation in overseas markets to create a second growth curve.

Profit forecasting and valuation. The company's net profit for 2024-2026 is estimated to be 0.911 billion yuan, 1.151 billion yuan, and 1.395 billion yuan, respectively, and the corresponding PE is 22X, 17X, and 14X, respectively. We have long been optimistic about the company's development and maintain a “buy” rating.

Risk warning: The risk of injections being approved overseas falls short of expectations, the risk that sales of heparin raw materials do not meet expectations, the risk that domestic medical insurance fee control pressure will increase, and the risk that estimates may be erroneous with reality, etc.