Key points of investment:

The company released its report for the third quarter of 2024

2024Q1-3: Revenue of 2.15 billion, up 13.4% year on year, net profit of 0.45 billion, up 45.1% year on year, net profit after deducting 0.42 billion year on year, up 44.8% year on year; 2024Q3: revenue of 0.78 billion, up 15.5% year on year, net profit of 0.17 billion year on year, up 47.4% year on year, net profit after deducting 0.16 billion year on year.

The fee control effect is remarkable, and the sales expense ratio has dropped significantly

2024Q1-3: Gross margin was 73.8%, down 4.2 pct year on year, sales expense ratio was 39.9%, down 6.7 pct year on year, management expense ratio was 2.9%, down 0.7 pct year on year, R&D expenses rate was 7.8%, down 0.5 pct year on year, financial expenses ratio was 0.5%, up 0.4 pct year on year.

2024Q3: Gross margin was 74.9%, down 3.6 pct year on year, sales expense ratio was 39.6%, down 3.1 pct year on year, management expense ratio was 2.6%, down 0.7 pct year on year, R&D expenses rate was 6.9%, down 3 pct year on year, financial expenses ratio was 0.5%, up 0.2 pct year on year.

The company continues to strengthen its ability to control terminal channels and continuously reduce sales expenses.

The 23Q4-24Q3 company's sales expenses ratio was 53.2%/40.5%/39.6%/39.6%, respectively, and the company's fee control effect was remarkable.

The company is rich in research pipelines and has plenty of momentum for long-term growth

According to the company's semi-annual report, the company has marketed key topical formulations, including loxoprofen sodium gel patch and ketoprofen gel patch. More than 20 topical formulation products are under development, including: lidocaine gel paste, loxoprofen sodium patch, flubiprofen gel patch, indomethacin gel patch, etc. The company has a rich layout of topical preparations and long-term growth in product development. Full of power.

Profit forecasting and investment advice

We expect net profit to be 0.52/0.68/0.89 billion yuan for 24-26 (maintaining the previous forecast value), corresponding PE of 22.4/17.1/13 times, respectively. The company's performance is impressive, and the product matrix is formed, and long-term growth momentum is strong, maintaining a “buy” rating.

Risk warning

Risk of product sales and promotion falling short of expectations; increased risk of industry competition; risk of policy fluctuations; product development falling short of expectations.