Incident: The company released the 2024 three-quarter report forecast. It is expected to achieve net profit of 1.1-1.175 billion yuan in the first three quarters of 2024, an increase of 40%-50% over the previous year; deducted non-net profit of 1.015-1.09 billion yuan, an increase of 45%-56% over the previous year.

Q3 The boom was maintained, and the performance greatly exceeded expectations. In the third quarter of a single quarter, the company expected to achieve net profit of 0.362-0.437 billion yuan, +43% to 73%; median value of 0.399 billion yuan, +58% year over year; expected to deduct non-net profit of 0.315-0.39 billion yuan, +50% ~ 85% year over year; median value of 0.353 billion yuan, +68% year over year; performance significantly exceeded market expectations. We expect that as September gradually enters the peak season for autumn and winter nourishment, downstream retail pharmacies are in strong demand, and the company's Ejiao series products are booming in production and sales, driving impressive performance.

Pharmaceuticals+health consumer goods two-wheel drive to create a domestic nourishing track leader. During the 14th Five-Year Plan period, the company further consolidated its position as the top brand of “Nourishing Guobao Donga Ejiao” and fully implemented the “two-wheel drive” business growth model for pharmaceuticals+health consumer goods. On the one hand, it strengthened and improved the main Ejiao business, and on the other hand, actively expanded new nourishing tracks and cultivating epitaxial varieties, and was committed to becoming a domestic leader in nourishing health.

Respond positively to the call and give back large dividends to shareholders. In August, the company announced the 2024 mid-term profit distribution plan. Based on the total share capital on June 30, 2024, a cash dividend of 11.44 yuan (tax included) was distributed to all shareholders for every 10 shares. The total cash dividend was 0.737 billion yuan, accounting for 99.77% of net profit due to mother in the first half of the year.

Profit forecast and investment suggestions: According to the three-quarter report forecast, we have slightly adjusted the company's profit forecast. We expect the company to achieve operating income of 5.876, 7.074, 8.135 billion yuan (previous values were 5.776, 6.874, 8.085 billion yuan), up 24.62%, 20.39%, and 14.99% year-on-year, and achieve net profit of 1.48, 1.782, 2.092 billion yuan (previous values were 1.451, 1.746, 2.098) billion yuan), a year-on-year increase of 28.64%, 20.34%, and 17.45%. Considering that the company nourishes traditional Chinese medicine, the core product Ejiao series has maintained a high boom, and is gradually forming dual-wheel drive growth for pharmaceuticals+health consumer goods, maintaining a “buy” rating.

Risk warning events: risk of fluctuations in raw material prices; risk of falling short of expectations for Ejiao block and compound Ejiao paste; risk of policy changes; risk of untimely update of research and usage information data.