Revenue for the third year in 2024 increased 10.4% year over year. Achieved total operating income of 3.048 billion yuan in the first three quarters of 2024, up 21.80% year on year; realized net profit of 0.24 billion yuan, up 29.52% year on year; realized net profit deducted from mother 0.236 billion yuan, up 28.11% year on year; achieved total operating income of 1.058 billion yuan, up 10.44% year on year in the third quarter of 2024; achieved net profit due to mother 0.085 billion yuan, a net increase of 1.63% year on year; achieved deducted non-return net profit Profit was 0.082 billion yuan, up -4.65% year over year.

Demand in China was under marginal pressure in the third quarter. The American region continued to grow at a high rate, and revenue growth in gummies and hard capsules was impressive. By region, China's market channel restructuring in the third quarter of 2024 was under phased pressure, decelerating, and is expected to improve in the fourth quarter; the share of major customers continued to rise in the third quarter, with plenty of on-hand orders in the export business, and double-digit BF growth; the European region continued to grow steadily in the third quarter, continuing to drive new customer development; the new domain market maintained booming growth at a low base, opening up emerging markets such as Indonesia and Russia. By product, softgels maintained a high growth rate as the company's core dosage form, while gummies maintained a boom as the penetration rate increased, growing by 26.8%/60.5% respectively in the first half of 2024.

Changes in the customer structure led to a decline in gross margin and an increase in management expenses. BF loss reduction was still ongoing, and net interest rates declined in the short term as a result. The company's gross sales margin for the third quarter of 2024 was 29.63%, -1.65pct year on year. The main reason was that some traditional direct sales and traditional pharmaceutical company-type major customers in China lowered their annual expectations. The share of revenue in China with high gross margins declined. At the same time, BF's loss reduction fell short of expectations, which also had an impact. In terms of expenses, the company's sales/management/R&D expenses for the third quarter of 2024 were 7.27%/9.39%/2.96%/, respectively, -0.14pct/+1.03pct/ -0.06pct, respectively. The year-on-year increase in management rates is expected to be mainly due to early talent reserves. In the end, the company's net profit margin for the third quarter of 2024 was 8.07%, -0.70pct year on year.

A leading ODM leader in nutrition and health food, leading R&D efficiency. The health products industry is booming in the context of aging. The CAGR is expected to be 6.2% in 2024-2026, which favors leading foundry companies in the context of decentralization. Originally from Xianle Health Pharmaceutical Company, it has been deeply involved in the industry for decades and has achieved a leading position. It has remarkable qualifications, R&D and product advantages. The company's global layout has achieved remarkable results, its competitive advantage is constantly being consolidated, and there is plenty of room for medium- to long-term growth.

Investment advice: First coverage, giving a “better than the market” rating. We expect the company to achieve total operating income of 4.318/4.931/5.574 billion yuan in 2024/2025/2026, up 21%/14%/13% year on year, net profit to mother 0.352/0.446/0.55 billion yuan, up 25%/27%/23% year on year, and achieve earnings per share of 1.49/1.89/2.33 yuan respectively. The current stock price corresponds to PE 18.0/14.2/11.5 times, respectively. The first coverage gave the company PE16-18x in 2025. The reasonable price range was 30.24-34.02 yuan, and the corresponding market capitalization range was 7.1-8 billion yuan, with a 9-22% premium compared to the current stock price.

Risk warning: weak demand; rising raw materials; increased industry competition; policy risks.