Matters:

The company released its 2024 three-quarter report. In the first three quarters of 2024, the company's revenue was 0.811 billion yuan, up 0.79% year on year, and net profit to mother was 0.084 billion yuan, down 26.05% year on year, after deducting non-net profit of 0.072 billion yuan, down 40.18% year on year. In the third quarter of 2024, the company's revenue was 0.279 billion yuan, down 1.14% year on year, up 3.57% month on month, and net profit to mother was 0.032 billion yuan, up 8.20% year on year, up 24.26% month on month, after deducting non-net profit of 0.024 billion yuan, down 17.19% year on year and up 5.73% month on month.

Commentary:

The share of overseas revenue continues to rise. In the first half of 2024, the company achieved revenue of 0.532 billion yuan, an increase of 1.83% over the previous year, of which overseas revenue was 0.299 billion yuan, an increase of 12.68% over the previous year, and the share of revenue increased to 56%.

In the third quarter of 2024, the company achieved revenue of 0.279 billion yuan, a year-on-year decrease of 1.14%, of which overseas revenue was 0.159 billion yuan, and the share of revenue increased further to 57%. The company's overseas business continues to expand rapidly, and the overseas market continues to gain strength. The increase in overseas revenue is driving the steady growth of the company's overall business, while also leading to a continuous increase in the share of overseas revenue.

The company's gross margin has rebounded markedly. Following a steady recovery in gross margin in the second quarter of 2024, with a month-on-month increase of 1.22pct to 40.11%, the gross margin in the third quarter of 2024 further increased 4.24pct to 44.35%. The main reason for the increase is that, on the one hand, the gross margin of the company's overseas business was higher than that of domestic, and the continuous increase in the share of overseas revenue contributed to the increase in gross margin. On the other hand, the company continued to strengthen its intellectual property system, strengthen the layout of novel molecular blocks and core product lines, consolidate its hard strength in science and technology, optimize the product structure, and increase the revenue share of high-value products , optimize the customer structure and focus on developing value-based customers.

The results of the company's refined management are gradually showing. In 2023, the company renovated and expanded its regional centers in Germany and India, further consolidating its core advantage of “more, faster, better, and cheaper”, and plans to intelligently lay out US warehouses. In terms of sales, the company actively participated in academic conferences and exhibitions at home and abroad, and its brand influence continued to increase. In terms of research and development, the company has increased the layout of novel drug molecular blocks and core product lines. By the end of the first half of 2024, the company had 0.12 million types of products in stock, which can provide end customers with more than 0.4 million pharmaceutical molecular blocks with novel structures and diverse functions. In 2023, sales expenses, administrative expenses, and R&D expenses combined increased 47%, and the three rates reached 28.4%. The company actively carries out refined management. In the first three quarters of 2024, the three rates were 27.2%.

Investment advice: Due to pressure on the gross margin net margin of the 2024H1 company, the 2024Q3 profit side is greatly affected by exchange. We expect net profit to be 0.117, 0.166, and 0.22 billion yuan in 2024-2026 (previously estimated values were 0.135, 0.176, and 0.241 billion yuan), up 6.5%, 42.1%, and 32.7% year-on-year. According to the comparable company valuation method, the company was given 36 times PE in 25 years, with a target market value of 6 billion yuan, and a target price of about 66 yuan. At the same time, referring to the cash flow discount valuation method, the conclusion was cross-verified through absolute valuation, and the “recommended” rating was maintained.

Risk warning: 1. Industry demand recovery falls short of expectations; 2. Market competition intensifies; 3. Overseas market expansion falls short of expectations.