In the first three quarters of 2024, the company achieved operating income of 1.932 billion yuan, up 3.61% year on year; net profit to mother was 0.085 billion yuan, up 23.72% year on year; net profit after deducting non-return to mother was 0.091 billion yuan, down 30.67% year on year.

2024Q3 achieved operating income of 0.667 billion yuan, up 28.59% year on year; net profit to mother was 0.032 billion yuan, up 4570.27% year on year; net profit after deducting non-return to mother was 0.029 billion yuan, up 51.32% year on year.

Q3 The net interest rate was boosted by factors such as a recovery in performance, reduced impairment, and increased exchange earnings. 24Q3 The company's gross profit margin was 35.55% (flat month-on-month), and the net profit margin was 4.78% (+2.58pp). 24Q3 company's sales expense ratio is 5.38%, year on year +1.55pp; management expense ratio is 12.12%, year on year +0.84pp; financial expense ratio is 2.86%, year on year +0.63pp; R&D expense ratio is 9.40%, -1.94pp year on year. The net income from the 24Q3 investment was -1.3369 million yuan; accrued credit impairment losses were 2.3085 million yuan; asset impairment losses were drastically reduced and reversed back to 4.1969 million yuan. Factors such as reduced impairment and increased exchange earnings all boosted the net interest rate. The company's gross margin remained stable, and the CDMO and formulation business grew rapidly in Q3. With the increase in production of non-sartan APIs and the development of new customers and standardized markets, we expect the company's capacity utilization rate to increase in 2025, and profit margins are expected to expand.

The API business is showing resilience, and the CDMO and formulation business are driving growth. The third-quarter revenue of the company's generic drug ingredients and intermediates business increased slightly compared to the second quarter, mainly due to growth in the non-sartan APIs and intermediates business; CDMO's third-quarter revenue recovered to 85.32 million yuan, mainly due to fluctuations in customer supply pace; the pharmaceutical business revenue for the third quarter was 74.9 million yuan, and 24H1 was 97.03 million yuan, which grew rapidly.

Non-sartan APIs and formulations are expected to maintain good growth momentum for 25 years. According to the company's announcement, in terms of non-sartan APIs, the company added 4 new international registration certificates and 6 varieties of domestic registration to A in 2024. The company expects to release non-sartan APIs next year, such as ezetimibe, tigrellol, vigagliptin, and sitagliptin. In terms of formulations, the company expects to basically maintain the target of 15-20 approvals per year for the next two years. With the increase in formulation approvals and the expansion of sales staff, it is expected that in the next two to three years, the formulation business sector will be in a process of rapid development.

Profit forecast and investment rating: Considering the bottom of the price of Sartan API, changes in CDMO customer demand, and the company's production capacity utilization rate increase, we adjusted the company's profit forecast. The company's net profit forecast is expected to be 0.12/0.25/0.38 billion yuan in 2024-2026, a year-on-year growth rate of 335%/111%/52%. The corresponding PE is 52/24/16 times, maintaining the “increase” investment rating.

Risk warning: Risks such as increased competition, exchange rate fluctuations, environmental safety, and failure to accept FDA warning letters.