Incident: The company released its 2024 three-quarter report. In the first three quarters, it achieved operating income of 0.994 billion yuan (-6.30%), net profit attributable to shareholders of listed companies of 0.243 billion yuan (+15.71%), and deducted non-net profit attributable to shareholders of listed companies was 0.197 billion yuan (+15.84%); of these, it achieved operating income of 0.361 billion yuan (+15.83%) in the 3rd quarter, and net profit attributable to shareholders of listed companies was 79.81 million yuan Million yuan (+4.68%), deducted non-net profit attributable to shareholders of listed companies was 80.92 million yuan (+109.39%).

Harvesting affects gradual digestion, and injectable multivitamin (12) still has great market potential. In September 2023, the company's core product, injectable multivitamin (12), was exclusively selected in centralized procurement by the Henan 19 Provincial Alliance. Due to the decline in bid price after collection, the product's sales revenue (confirmed as service revenue in the company report) declined year-on-year and month-on-month in the second half of 2023, and the company's service revenue improved month-on-month in the first half of 2024. We believe that mainly due to increased market coverage after collection, sales volume within the collection area increased to a certain extent, while benefiting from the decline in delivery fees and market investment costs. The profitability of this product is expected to remain the same. Good level. As of the 2024 mid-term report, a total of 17 provinces (districts and military corps) have officially implemented the selection results of the 19 provincial alliances in Henan and centralized volume procurement of the fourth batch of drugs in Zhejiang. Historically, after injectable multivitamin (12) was directly included in the national medical insurance catalogue in 2020, sales volume has seen rapid growth since 2021; we believe that due to lower prices after collection, injectable multivitamin (12) is expected to accelerate the replacement of traditional fat and water maintenance products, compounding the increase in market coverage and the decline in hospital access difficulties after collection. It is expected that the sales volume of this product will usher in a new round of growth.

The second-tier variety echelon is rich, and continued growth can be expected. In terms of other products, various trace elements were affected by the fact that some local harvesting was not selected, and there was a decline in the first half of the year. However, since it won the bid for the Beijing-Tianjin-Hebei “3+N” Alliance collection, we believe that this product is expected to resume rapid growth after absorbing the decline in collection prices. Pediatric multivitamin injections (13) entered the marketing period after entering the medical insurance list in 2023, and achieved revenue of 32.75 million yuan (+47.29%) in the first half of 2024, which is expected to continue the rapid growth trend. In addition, the company has been approved for a number of new vitamins, amino acids and electrolytes products in recent years. The competitive pattern is good, and it also has good market potential, which is expected to become a new driving force for the company's performance growth.

Profitability continues to improve, and the inflection point of performance is clear. Since 2024, the company's revenue in each quarter has shown a continuous improvement trend. The amount of non-profit/revenue deducted and non-profit deducted in the third quarter reached new highs in recent years, and the inflection point of performance is clear. We think it is mainly due to the decrease in sales costs of products after collection and the increase in profit margins brought about by the dilution of fixed costs after the release of new products. As the company's revenue volume grows, we believe there is still room for improvement in the company's profit margin.

Profit forecasting and valuation. According to the company's operating conditions, we adjusted the profit forecast. We expect the company's revenue from 2024 to 2026 to be 1.377 billion yuan, 1.662 billion yuan, and 1,951 billion yuan, respectively, with year-on-year growth rates of 4.1%, 20.7%, and 17.4%, respectively; net profit to mother is 0.251 billion yuan, 0.314 billion yuan, and 388 million yuan, respectively, with year-on-year growth rates of 17.4%, 24.9% and 23.8%, calculated at the closing price on November 4. Corresponding PE was 17.4, 13.9, and 11.2 times, respectively, maintaining a “buy” rating.

Risk warning: Sales of collected varieties fell short of expectations, and subsequent renewal prices fell more than expected; new products were released at a lower rate than expected; and R&D progress was lower than expected.