Core view: The company is one of the leading companies in the field of specialty APIs in China. Based on technological innovation and deep cultivation of specialty complex APIs, the company is in a leading position in the country in the fields of complex synthesis, synthetic biology, and photochemistry. In recent years, the company's product line has been continuously expanded and enriched, driving continuous revenue growth. At the same time, the company is actively laying out potential areas. At this point, we think we can see the company's subsequent multiple catalysis: 1) Continued expansion of the formulation business: Market development of didroprogesterone tablets continues to advance, and estradiol/estradiol didroprogesterone composite packaging tablets have been declared for listing. It is expected that the continuous enrichment of new pipelines for subsequent formulation business will drive the company's performance growth. 2) Simeglutide APIs: The construction of the fermentation workshop plant and synthesis workshop plant has been completed, and the expansion and release of new production capacity will drive good growth in the API business. 3) Small nucleic acid business: The 100 kg commercial production line was launched in September '24, opening up room for subsequent growth.

Deeply involved in the field of specialty APIs, the product line is constantly being expanded and enriched. The company's total revenue increased from 0.544 billion yuan in 2017 to 1.263 billion yuan in 2023, and revenue continued to grow well. The company is actively expanding new and old customers, and the pharmaceutical ingredients are continuously expanding. The new anti-tumor categories and women's health categories added in recent years have all brought good contributions. Currently, the company's dominant varieties such as epleridone, fluticasone propionate, abiraterone acetate, didrogesterone, pregabalin, and tenofovir all have a certain market share level in the global market.

Formulation integration opens a new chapter. The company submitted a domestic registration application for dodroprogesterone tablets in 2021 and obtained a drug registration certificate for didroprogesterone tablets in June 2023, becoming the first domestic imitation company and entering the more than 2 billion market. In 2023, as the first year of listing, the product achieved sales of 0.09 billion yuan. In addition to didroprogesterone monotherapy products, the company has laid out a variety of estradiol/estradiol didroprogesterone composite packaging tablets. The marketing application for this product was accepted in July 2024, and the production line construction project with an annual output of 0.3 billion estradiol/estradiol didroprogesterone composite packaging tablets has completed process verification batch production. It is expected that the continuous enrichment of new pipelines for the follow-up formulation business will drive the company's performance growth.

Actively lay out the peptide business, and capacity building is imminent. Since 2016, the company has used synthetic biology technology to rationally optimize the metabolic pathways of the chassis strain of simeglutide, and used a chemical synthesis platform to conduct innovative research on subsequent synthesis steps to reduce the cost of simeglutide raw materials. As of 24H1, the company has obtained 4 invention patents related to simeglutide. It has applied for 2 invention patents, has good technical and patent reserves, and completed the DMF filing of simeglutide API in the US in September 2023.

In 2023, the company built a 300KG simeglutide API production line and supporting facilities in Yangzhou, Jiangsu. As of the 24H1 fermentation workshop plant and synthesis workshop, the construction of the 24H1 fermentation workshop plant and synthesis workshop plant had been completed, equipment installation had been completed, and equipment was being tested. The commissioning of the project is expected to help the company expand from small molecule drugs to the field of polypeptide drugs.

Lay out the oligonucleotide blue ocean market, and launch a 100-kilogram commercial production line to open up room for growth. The company established Shanghai Orient Biotechnology Co., Ltd. in July 2021 to actively lay out one-stop services for nucleic acid drugs from laboratory R&D, process development, clinical stage production to commercialization. In January 2023, the company reached a cooperation with Cytiva to accelerate the commercialization of the company's oligonucleotides. In September 2024, the company announced that it had completed the construction of the first FlexFactory small nucleic acid commercial production line. The completion of this production line will provide Oriete with a high-quality and stable production platform, improve the company's CDMO business layout, and help the company provide high-quality and diversified services to more domestic and foreign customers.

Profit forecast: We forecast that in 2024-2026, the company's revenue will be 1.54 billion yuan, 20.1 billion yuan, and 2.67 billion yuan, respectively, up 22%, 30.5% and 32.8% year on year; net profit to mother will be 382, 5.18, and 680 million yuan, respectively, up 32%, 35.6% and 31.2% year on year, respectively. The equivalent EPS is 0.94 yuan/share, 1.28 yuan/share, and 1.67 yuan/share, respectively. The corresponding PE is 22.9X, 16.9X, and 12.9X, maintaining a “buy” rating.

Risk warning: risk of changes in the international trade environment; increased risk of industry competition; industry policy risks.