Incident: In the first three quarters of 2024, the company achieved operating income of 6.365 billion yuan (-25.76%, same ratio, same below), realized net profit of 0.555 billion yuan (-68.46%), realized net profit after deduction of 0.507 billion yuan (-69.07%); 2. 24Q3, the company achieved revenue of 1.76 billion yuan (-1.3%), and realized net profit to mother of 24.32 million yuan (-84.07%). Net profit to mother was 2.57 million yuan (-97.41%).

The high base in the previous period affected apparent revenue, and the month-on-month growth performance improved in a single quarter. In 2023, demand for the company's cold respiratory products exploded in the short term due to the liberalization of epidemic control, leading to a large degree of high base and high social inventory. 24H1 achieved revenue of 2.314 billion yuan (-7.86%) for cardiovascular drugs and 1.284 billion yuan (-58.42%) for anti-cold drugs. However, judging from the company's overall revenue level, the year-on-year growth performance in a single quarter has improved. 24Q1, 24Q2, and 24Q3 companies' revenue growth rates were -35.89%/-27.1%/-1.3%, respectively. We believe that social stocks of anti-cold products have gradually been depleted, and it is expected that the bottom will reverse in the future.

The R&D pipeline continues to transform, and academia leads long-term development for the better. R&D innovation is the driving force for Eling Pharmaceutical to achieve sustainable development. The company's R&D investment and R&D output efficiency continued to improve. In the first three quarters of 2024, the company's R&D expenses were 0.572 billion yuan (-3.67%), and the R&D cost rate was 8.98% (+2.06pct). In the past four years, the company has developed and marketed 4 innovative traditional Chinese medicines, making it one of the companies with the highest number of approvals. At present, the company currently has 14 patented new drugs, and has formed a rich product group. Its central pharmaceutical field for cerebrovascular and respiratory diseases is already in a leading position in the industry; the current R&D pipeline covers more than 40 innovative Chinese medicines under development, covering 12 clinical systemic diseases. In addition, the company has successively published several major clinical research results: 1) “Myocardial Protection Study on the Treatment of Acute Myocardial Infarction with Tongxin” was published in JAMA's “Journal of the American Medical Association”, 2) the “Intervention Study of Jinlida Particles on Abnormal Sugar Tolerance in Metabolic Syndrome” was published in JamaIncurable Medicine's “JAMA Internal Medicine”, 3) “Evaluation Study on Complex Endpoint Events of Chronic Heart Failure”, and the results paper was published in Nature Medicine “Natural Medicine”, 4) “Sansong Yang The results of the paper “Clinical Study on the Prognosis of Patients with Radiofrequency Atrial Fibrillation” were published in the European Heart Journal “European Heart Journal”. At the same time, the company is also carrying out a number of evidence-based medical studies in an orderly manner, and continues to work to enrich the evidence of product treatment.

Profit forecast and investment rating: Considering that there is some pressure on the company's 24-year performance, the year-on-year growth rate of the company's revenue has improved quarterly. At the same time, the company's R&D pipeline continues to transform and academic capabilities are outstanding. We expect the company's net profit to be 0.784/1.051/1.253 billion yuan in 24-26. The PE corresponding to the current market value is 36/27/23X, maintaining a “buy” rating.

Risk warning: Social inventories of the company's main products fall short of expectations, the risk of falling prices of the company's products, competition increasing the risk, etc.