Profit attributable to the company's adjusted shareholders fell 20.7% year on year in the first half of '24: the company's revenue in the first half of '24 was +1.0% to 8.57 billion yuan, after deducting the impact of COVID-19, non-COVID-19 revenue +7.7%. The company's gross margin fell 2.8 percentage points to 39.1% year over year due to the decline in high-margin R-side revenue and the impact of the decline in overseas factories. The company's sales, management, R&D, and financial expense ratios increased 1.5, 1.0, 0, and -0.1 percentage points year-on-year to 2.6%, 9.0%, 4.0%, and 0.8%, respectively. In summary, the company's profit to mother fell 33.9% year on year to 1.5 billion yuan, and profit margin to mother fell 9.2 percentage points year on year to 17.5%. If changes in the fair value of share-based compensation expenses, foreign exchange earnings, and equity investments were adjusted, the company's adjusted profit to mother was -20.7% to 2.25 billion yuan, and the adjusted profit margin to mother fell 7.2 percentage points to 26.2% year over year. The company's net cash for the year 24 was 7.37 billion yuan. The company's free cash flow for the first half of '24 was -0.6 billion yuan.

The total number of projects increased by 61 to 742 in 24: the total number of projects in 24 years was 742, of which 359 were pre-clinical, and 52 new projects were signed in the first half of the year. The number of new projects signed still shows the company's competitiveness on the R side. There are 311 early clinical projects (including 224 in phase I and 87 in phase II). From the changes in the number of stages of the project, it can be seen that the pipeline flow rate from pre-clinical to clinical stages is slowing down. There are 56 clinical phase III projects and 16 commercialization projects. The reduction in commercialization projects is mainly due to COVID-19 and the removal of an old project. Project progress XDC and Dual Resistance are still important growth engines. The number of XDC projects increased by 24 to 167. This is also reflected in XDC's financial data. In the first half of the year, this portion of revenue increased 88.1% year-on-year to 1.61 billion yuan, accounting for 18.8% of revenue, and the operating profit margin increased 10.1 percentage points to 34.8%. App WuxiBody? The number of platform projects increased by 5 to 50 in the first half of the year. Tongrun Pharmaceutical recently authorized the CD3xCD19 dual antibody CN201 in the phase 1b/2 clinical trial based on Pharmaceutical Biotech's WuxiBody technology with a milestone of 0.7 billion US dollars plus 0.6 billion US dollars, once again proving that the company's TCE double/polyantibody platform capabilities have been recognized by major international manufacturers.

Policy impact: In September '24, the U.S. House of Representatives passed a review vote on the Biosafety Act to restrict funds, loans, or grants provided by the US government from being used to perform government-funded contracts using certain biotechnology equipment or services provided by designated companies. According to the House version, the number of projects affected by Yao Ming Biotech's contract accounts for about 2% of the company's total number of projects. According to the legislative process, for it to become law, it must also be approved by the US Senate before the end of the 118th congressional term (1/3/25). Also, although biosafety proposals were not included in the NDAA (National Defense Authorization Act) issued by the US Senate in September '24, there is still uncertainty about the future.

Target price HK$18.3: The company proposed a repurchase plan of 0.6 billion US dollars in December June 23. The company has repurchased approximately 0.13 billion shares since '24, at a cost of about HK$1.94 billion. We use DCF as the company's valuation. Since the policy is still uncertain, we set a discount rate of 12% and a sustainable growth rate of 1%, giving the company a target price of HK$18.3, with room for an increase of 20.8% from yesterday's closing price.