Key points of investment

Event: The company released its 2024 semi-annual report. In the first half of 2024, Dongcheng Pharmaceutical achieved revenue of 1.421 billion yuan (-20.41%), net profit of 0.112 billion yuan (-39.35%), net profit of 0.106 billion yuan (-39.02%) after deducting non-return to mother. Revenue for Q2 alone was 0.773 billion yuan, down 17.23% year on year, net profit not attributable to mother was 0.051 billion yuan, down 61.16% year on year and 7.21% month on month.

The API business is under pressure in the short term, and the nuclear drug business is relatively stable. The 2024H1 nuclear drug business segment achieved sales revenue of 0.499 billion yuan, a year-on-year decrease of 0.58%. Among them, the key product 18F-FDG achieved revenue of 0.195 billion yuan, a year-on-year decrease of 4.30%; Yunke Injection achieved revenue of 0.123 billion yuan, a year-on-year decrease of 0.83%. The API business segment's sales revenue was 0.657 billion yuan, a year-on-year decrease of 31.03%. Among them, the key product heparin API products achieved operating income of 0.483 billion yuan, a year-on-year decrease of 39.02%.

The layout of nuclear drug pipelines is rich, and the networked production layout is complete. The company has initially completed the product line layout in the field of nuclear medicine, focusing on key areas such as tumors, neurodegenerative diseases, and cardiovascular and cerebrovascular diseases, forming a full coverage of “screening-diagnosis-treatment” radiopharmaceuticals. Up to now, the company has put into operation 7 nuclear drug production centers mainly for single-photon drugs, 21 nuclear drug production centers mainly for positrons, and 2 other operation centers. Currently, 8 nuclear drug production centers are under construction, and the company has put into operation 30 nuclear drug-related production centers.

Investment suggestions: In recent years, the company has focused on building a full industry chain system from diagnostic nuclear drugs to therapeutic nuclear drugs. Multiple products under development are being actively promoted. We predict that the company's net profit for 2024-2026 will be as follows:

0.221/0.306/0.419 billion yuan, corresponding PE valuations are: 46.4/33.5/24.5 times, respectively. Maintain a “buy” rating.

Risk warning: risk of changes in industry policies, risk of product price fluctuations, R&D risk, etc.