Incident: In the first three quarters of 2024, the company achieved operating income of 1.575 billion yuan (-3.49%, same ratio, same below), achieved net profit of 0.384 billion yuan (-3.28%), and realized net profit after deduction of 0.347 billion yuan (-7.78%); 2. 24Q3, the company achieved revenue of 0.506 billion yuan (+15.71%), and realized net profit to mother 0.083 billion yuan (+377.72%). Net profit to mother 0.073 billion yuan (+657.38%).

The recovery trend of the main varieties is obvious. In the first quarter of 2024, due to national policy adjustments, the sales progress of products such as Sanjin tablets and watermelon cream was hampered to a certain extent. The company adopted a series of targeted countermeasures, such as sorting out channel prices, adjusting related product specifications, and increasing sales efforts. As the effects of the measures taken gradually became apparent, sales of Sanjin tablets gradually caught up in the second quarter, and sales of the watermelon cream series slowly recovered. The company's main operating indicators for the first half of the year narrowed drastically compared to the same period last year, and there is a trend of continuous narrowing.

By sector, 2024H1, the company's industrial sector achieved revenue of 1.038 billion yuan (-5.6%); the commercial distribution sector achieved revenue of 0.022 billion yuan (-5.62%). Considering that the company's overall revenue level for Q2 and Q3 has maintained positive year-on-year growth. We believe that the company's early high base problem has basically been digested, and it is expected that it will start again in the future.

Subsidiaries' costs are effectively controlled, and the majority shareholders' holdings increase their confidence in development. Biopharmaceuticals are an important part of the company's two-wing strategy. Currently, the industry is in a cold period. Bai Fan and Treasure Ship are carriers for the company's biopharmaceutical sector. Although Bai Fan still has a certain number of orders, it will take some time for them to land. The company controlled the costs and expenses of Treasure Ship and Bai Fan to the greatest extent possible, optimized the personnel structure, and hired professional consulting firms to carry out special management to minimize losses. In October 2024, the company announced a profit distribution plan for the first three quarters, which is expected to distribute cash dividends of 0.147 billion yuan. The dividend distribution plan for the first three quarters is based on expectations and strategic plans for the company's steady profitability, good financial situation, and future development prospects, and proposed to positively return all shareholders on the premise of ensuring the normal operation and long-term development of the company. We expect the company to maintain a high dividend distribution ratio throughout the year. Furthermore, in March 2024, the company announced that the actual controller plans to increase its holdings by no less than 5 million yuan within 6 months. We believe that this move is also based on confidence in the company's future development prospects and recognition of long-term investment value.

Profit forecast and investment rating: Considering that the company has achieved positive year-on-year revenue growth in the 2nd and 3rd quarters of '24, and that the company's “two wings in one” strategy continues to advance, we expect the company's net profit to mother for 24-26 to be 0.46/0.52/0.58 billion yuan. The current market value corresponds to PE of 19/17/15X, maintaining a “buy” rating.

Risk warning: risk of rising raw material prices, risk of falling company product prices, competition increasing risk, etc.