Incidents:

The company released its report for the third quarter of 2024. In the first three quarters, the company's revenue was 0.572 billion yuan (YOY -1.50%); net profit due to mother 0.116 billion yuan (YOY -17.97%); net profit after deducting non-return to mother was 0.114 billion yuan (YOY -13.58%).

2024Q3, the company's revenue was 0.177 billion yuan (YOY +0.53%); net profit attributable to mother was 30.5866 million yuan (YOY -6.66%); net profit after deducting non-attributable net income was 29.2397 million yuan (YOY -2.56%).

Comment:

The cost rate and R&D expense ratio increased, and the short-term profit was under pressure in the first three quarters of 2024. In addition to the sales expense ratio, the company's sales expense ratio increased year-on-year. The company's sales expense ratio in the first three quarters was 16.47% (down 0.66pct year on year), the management expense ratio was 9.42% (up 1.00pct year on year), the R&D expense ratio was 10.76% (up 2.31 pct year on year), and the financial expense ratio was 0.60% (up 1.53 pct year on year).

In the first three quarters, the company's gross margin was 61.41% (down 1.08pct year on year), and the net margin was 18.35% (down 5.27pct year on year), putting short-term pressure on profits.

Research and development results were gradually implemented. The CKBA innovative drug phase II clinical trial was successfully completed in the third quarter of 2024. Anhui Taienkang, a wholly-owned subsidiary, received the “Notice of Acceptance” issued by the State Drug Administration for licensing registration and marketing of drugs produced in China, and the company's R&D results were gradually implemented.

In October 2024, the company's CKBA Ointment Phase II clinical trial enrolled all 200 subjects. The overall safety was good. The blind data showed a trend of good efficacy, showing great potential for subsequent development of this product. With the enrollment of all subjects, the company will accelerate the progress of the CKBA Ointment for Vitiligo Phase II clinical trials, and plans to submit a breakthrough therapy certification application based on the progress of the Phase II vitiligo indication clinical trial to further accelerate the marketing process of CKBA's new drug for treating vitiligo in Class 1.

Investment advice: Maintaining a “buy” rating

The company's revenue for 2024-2026 is expected to be 0.877/1.099/1.376 billion yuan (previous value was 0.885/1.109/1.389 billion yuan), revenue growth rates were 15.3%/25.3%/25.2%, respectively, and net profit to mother for 2024-2026 was 0.194/0.263/0.367 billion yuan (previous value was 0.207/0.284/0.389 billion yuan), respectively. /35.7%/39.8%, the 2024-2026 EPS is expected to be 0.46/0.62/0.86 yuan respectively, and the corresponding PE for 2024-2026 is 32/24/17x, respectively. The company has significant advantages in the fields of gastrointestinal medicine, gender health medication, and ophthalmology, and clinical trials of the innovative drug CKBA have been carried out smoothly. Maintain a “buy” rating.

Risk warning

Product development progress falls short of expectations; market competition increases risk.