Influenza has entered a seasonal epidemic period and is expected to peak in mid-January. According to the Chinese Center for Disease Prevention and Control, the influenza virus infection rate began to rise in November, and has risen significantly since December, becoming the number one respiratory pathogen facing both northern and southern provinces. The positive rate of outpatient emergency influenza virus increased by 1.4%/3.4%/5.3%/6.2% in the 48-52nd week of 2024, respectively, and the positive rate reached 30.2% by the end of the year; the positive rate for hospitalized influenza virus increased 0.6%/2.5%/2.4%/3.2%/5.4% month-on-month, respectively, and the positive rate reached 17.7% by the end of the year. Influenza activity this season is developing more slowly than in previous years. According to Dahe Health Network, colds caused by rhinoviruses in the fall of 2024 delayed the outbreak of influenza and are expected to reach a peak by mid-January 2025.

After the epidemic, more attention was paid to throat health, and Sanjin's proprietary Chinese medicine business settled smoothly under a high base. Unlike the common cold, the death rate for severe cases of influenza is as high as 10%. As the national infection rate rises, the demand for medication to treat and relieve symptoms will continue to increase. 24Q1 Guilin Sanjin's performance was greatly affected by the base figure during the pandemic; the decline in the semi-annual report narrowed significantly. Due to the continuation of changes in people's health awareness, 24Q2 revenue and profit were the second highest level in history, after the first release of the epidemic in early 23; by '24, the quarterly report was basically the same as the same period last year, and 24Q4 to 25Q1 demand is supported, and 25Q1 is expected to successfully achieve growth throughout the year and return to a normal operating rhythm in 25Q1.

An estimated dividend ratio of 4% is still attractive. The company's high dividend policy is expected to continue. According to the 80% dividend ratio, the dividend rate corresponding to the current stock price is about 4%. Compared with Shenwan's 2023 dividend rate (reference date is 2024.12.31), it ranks in the top 10 in the industry.

Investment advice: As an established traditional Chinese medicine company, the company has two well-known traditional Chinese medicine products, the watermelon cream series and the three gold tablets series. The core product base is stable, the market share is outstanding, and the performance share is high. It is expected that it will continue to benefit from people's attention to throat health care and aging trends in the post-pandemic era, which is the guiding principle for the company's performance. The company's multiple second-tier products have reached a scale of quasi-100 million. Subsequent targeted superposition of sales resources helped accelerate its “1 to 10” growth process and form a second growth curve. Overall, the company has been operating at a low profile for a long time, and there is room for improvement and upgrading in many directions. With the upcoming adjustments to the new version of the basic drug catalogue, many products are facing a development window. The biopharmaceutical sector has had an obvious drag in recent years. As efforts to reduce losses and increase efficiency continue to advance, the company's performance is expected to improve significantly. We predict that the company's 2024-2026 EPS will be 0.78, 0.87, and 0.99 yuan/share, respectively, and the corresponding PE will be 18.3x, 16.4x, and 14.4x, respectively, maintaining the “buy” rating.

Risk warning: Industry policy risks, loss reduction and fee control effects fall short of expectations, competition increases risk, and raw material prices fluctuate.