3Q24 results are in line with our expectations

The company announced the three-quarter results: 3Q2024, revenue of 2.86 billion yuan, +12.4%; net profit to mother of 0.24 billion yuan, -2.2% year over year; 1-3Q2024, revenue of 9.29 billion yuan, +9.3% year over year; net profit to mother of 0.87 billion yuan, +2.15% year over year; in line with our expectations.

Development trends

Financial expenses are affected by exchange losses. 3Q2024, the company's sales expense ratio is 4.2% (+0.2ppt, month-on-month -2.2ppt), management expense ratio 4.5% (month-on-month +0.1ppt), R&D expense ratio 5.3% (month-on-month +0.3ppt, year-on-year +0.1ppt), financial expense ratio 1.1% (+2.5ppt month-on-month, +1.9ppt). The financial expense ratio increased a lot, mainly due to an increase in exchange losses. The same period last year was exchange earnings.

Preparations are leaving the sea at an accelerated pace. In October 2024, Zhejiang Jutai Pharmaceutical, a wholly-owned subsidiary of the company, obtained approval from the US Food and Drug Administration (US FDA) for marketing. This product is the company's third formulation approved by the US FDA. In July 2024, the company's metoprolol succinate sustained-release tablets were approved by the FDA.

Strengthen cooperation in the field of synthetic biology. On September 1, 2024, the company signed a strategic cooperation framework agreement with Baiquirui to strengthen cooperation in the field of synthetic biology and jointly develop strategic innovative varieties. Baiqui Rui Biotech has developed and produced specialty products in the fields of proteins, peptides, and APIs. It specializes in enzyme-directed evolution and high-efficiency cell factory biosynthesis technology, and has built and developed a full-chain synthetic biology platform for precise protein design and protein molecular machine technology, including AI engine intelligent manufacturing platforms, protein design and efficient cell factory development, high-throughput screening, and enzyme-targeted evolution.

Profit forecasting and valuation

The profit forecast for 2024 and 2025 remains unchanged.

The current stock price corresponds to the 2024/2025 price-earnings ratio of 16.4x/13.5x.

Maintaining an outperforming industry rating, but due to recent systemic market adjustments, we raised our target price by 14.3% to 20.00 yuan, which corresponds to 20.5 times the 2024 price-earnings ratio and 16.8 times the 2025 price-earnings ratio. There is 24.8% upside compared to the current stock price.

risks

Capacity utilization falls short of expectations, orders fall short of expectations, risk of exchange rate fluctuations, geopolitical risk.