Incident: On October 21, 2024, the company issued an announcement of the controlling shareholder's plan to increase the company's shares. The controlling shareholder China Resources Jiangzhong plans to increase the company's shares within 12 months from the date of disclosure of the announcement through methods permitted by the Shanghai Stock Exchange trading system (including but not limited to centralized bidding, bulk trading, etc.). The total amount of the increase is not less than 0.06 billion yuan (inclusive), and no more than 0.12 billion yuan (inclusive).

A plan to increase holdings was announced, demonstrating confidence in long-term development. The last controlling shareholder increase plan was for Jiangzhong Group to increase its holdings by 2,053,250 shares in the range of less than 20 yuan per share from November 27, 2012 to February 27, 2013, accounting for 0.66% of the company's total shares. The final increase price was 17.92 yuan. On October 21, 2024, the company announced the controlling shareholder's plan to increase the company's share holdings. The total increase in holdings was 0.06-0.12 billion yuan. According to the estimated closing price of 22.40 yuan/share on October 21, the number of additional shares was 2,678,571-5,357,142 shares, accounting for 0.42%-0.85% of the company's total shares. On September 26, the Central Finance Office and the China Securities Regulatory Commission jointly issued the “Guiding Opinions on Promoting the Entry of Medium- to Long-Term Capital into the Market”, which proposes cultivating a capital market ecosystem that encourages long-term investment, encouraging eligible listed companies to buy back and increase their holdings, and effectively enhance the investment value of listed companies. We believe that the announcement of the plan to increase holdings reflects, on the one hand, the company's positive response to the call of the Securities Regulatory Commission, further deepening the “improving quality, efficiency and return” campaign, striving to match the company's market value with intrinsic value, and effectively assuming the main responsibility for high-quality development and enhancing its own investment value to help the stable and healthy development of the capital market; on the other hand, it highlights the company's confidence in future development prospects and recognition of medium- to long-term investment value.

Investment advice: Jiangzhong Pharmaceutical is a high-dividend+high-quality brand OTC enterprise. It focuses on the gastrointestinal field, complements and perfects categories such as cough, cough, rehabilitation, nutrition, etc., and actively explores online channels through “endogenous+epitaxial” two-wheel drive. We are optimistic about the company's future revenue growth and collaborative optimization under China Resources's management system through category expansion and channel strengthening. The company is expected to achieve revenue of 4.275/4.756/5.425 billion yuan in 2024-2026, up -3%/11%/14% year on year; achieve net profit due to mother 0.795/0.902/1.038 billion yuan, up 12%/13%/15% year on year, respectively; and the corresponding PE valuation is 18/16/14X, respectively, maintaining an “increase” rating.

Risk warning: macroeconomic fluctuation risk; policy risk; increased industry competition; risk of cost fluctuations; product promotion falling short of expectations; R&D risk.