China Resources Shuanghe 1-3Q24 achieved revenue/net profit to mother of 8.55/1.4 billion yuan (+1.2/ 1.1% yoy), 3Q24 realized revenue/net profit of 2.62/0.35 billion yuan (+0.5/ -11.8% yoy), 3Q revenue growth slowed and net profit growth rate declined. The main reasons: 1) Reduced off-season demand for large infusions+drag on sales of APIs and small water needles; 2) On the cost side, Zizhu's sales expenses were more confirmed +the company's interest income decreased compared to the same period, synthetic biology, etc. The field increased investment in R&D. Looking ahead to 24 years, considering the 4Q peak season for large infusions plus steady chronic disease/specialty sales, we are optimistic that the return home will maintain positive growth and maintain “purchases” during the year.

Infusion sector: 3Q off-season sales were slightly dragged down, and high-margin packaging materials and new therapeutic products drove growth

The company's revenue in the infusion segment 1-3Q24 was 2.41 billion yuan (-1.06% yoy), which mainly affected prices during the off-season and basic infusion collection in individual regions. Looking ahead to 24 years, we are optimistic that infusion revenue is still expected to achieve positive growth, with gross margin remaining at the current level (1-3Q GM 55.1%). Consider: 1) we estimate that 1-3Q sales of basic infusions are growing, and the share of nutritional/therapeutic infusion sales is expected to increase; 2) the company continues to expand and integrate large infusion production capacity; 3) key varieties such as ambroxol and pediatric amino acids are growing steadily. New products (propofol medium- and long-chain fatty milk, levofloxacin sodium chloride injections, etc.) drive revenue growth.

Non-infusion sector: The specialist sector led the growth. Oncology and nephrology gynecology continued to generate revenue of 6.07 billion yuan (+2.7% yoy) in the non-infusion sector. We are optimistic that the non-infusion sector will achieve positive growth throughout the year. Among them: 1) chronic disease sector 1-3Q revenue +1.78% yoy, benefiting from steady growth in Fushuiyue's re-bid regional collection+antihypertensive 0, etc., we expect single-digit revenue growth in 24 years; 2) The 1-3Q revenue of the specialist sector will benefit from +15.23% yoy Integration of gynecological varieties such as Yu Ting, as well as nephrology and oncology Waiting for the track to expand, we are optimistic about double-digit revenue growth during the year; 3) 1-3Q revenue for APIs is -7.8% yoy, mainly due to the impact of prices of products such as heparin and a decrease in export orders, and the revenue scale is expected to stabilize during the year.

Subsequent growth points: Self-development focuses on innovation platforms, and increases external BD and integration

We are optimistic about the company: 1) In terms of self-development, it focuses on small molecule innovation targets (Fascin protein targets and BePro prodrug platform) and lays out 5 core technology platforms (microspheres/pediatric drugs/multi-chamber bags/innovative crystals/continuous flow); 2) In terms of epitaxial growth, Zizhu consolidated the gynecological layout (1H24 Zizhu revenue/profit increased 10%/2% year over year, respectively, and estimated that 3Q revenue and profit all showed a high year-on-year increase in 3Q revenue and profit); 3) In August, the company obtained exclusive agency rights for 1.1 in mainland China, considering the high incidence of diabetes Incidence rate and company tightness With a tight sales layout, I'm optimistic about starting this year and next two years. Furthermore, we continue to be optimistic that the company will expand its layout in other collaborative treatment fields during the “14th Five-Year Plan” period.

Profit forecasting and valuation

We are optimistic that the company's net profit to mother will maintain positive growth in 24. We expect the company's EPS to be 1.70/1.86/2.03 yuan in 24/25/26, giving it 16 times PE in 25 years (the same average PE as its A-share comparable company Wind), and a target price of 29.76 yuan to maintain “buying.”

Risk warning: The recovery of large infusions fell short of expectations, the price reduction of collected varieties exceeded expectations, the risk of product development failure, and BD cooperation fell short of expectations.