Event: the company released the half-yearly report of 2022, and in the first half of 2022, the company realized operating income of 740 million yuan, an increase of 53.2% over the same period last year, a net profit of 160 million yuan, an increase of 43.8% over the same period last year, and a non-net profit of 150 million yuan, an increase of 40.4%.

Newly signed orders continued to increase, and the performance continued to grow at a high level under the epidemic. 2022H1 signed a new order of 1.67 billion yuan (+ 62.6%), added 257 customers, and successively provided drug research and development services to more than 1710 customers at home and abroad.

1) from the perspective of business segment: the business income of drug discovery and pharmaceutical research was 340 million yuan (+ 31.1%), and that of preclinical research was 400 million yuan (+ 79.2%). 2) from a regional point of view, the operating income of domestic customers is 570 million yuan (+ 58%), accounting for 77.1% of the main business income, while that of overseas customers is 170 million yuan (+ 39.7%), accounting for 22.9% of the main business income. 3) from the point of view of profitability: 2022H1's gross profit margin is 44.5% (- 1.2pp) and net profit rate is 21.9% (- 1.9pp). The profit growth rate is lower than that of operating income, on the one hand, because the R & D personnel under the control of the epidemic have not been fully released. On the other hand, during the period of closure and control, an additional one-time fee of 15.605 million yuan was incurred for epidemic prevention and maintaining the operation of the company, and 7.495 million yuan was paid in advance for some R & D personnel who were not on duty. The rate of sales expenses is 3.4% (- 0.9pp), the rate of management expenses is 10.6% (+ 2.8pp), the rate of R & D expenses is 6.9% (- 0.1pp), and the rate of financial expenses is-1.1% (- 0.9pp). The significant increase in management expenses is mainly caused by the increase in staff salaries and restricted stock provisions, as well as the increase in epidemic prevention and prevention during the closure and control period. The sharp increase in R & D expenses is mainly due to the improvement of R & D service capacity and business acceptance capacity and the increase in investment in independent R & D projects. the decrease in financial expenses is mainly due to the increase in the exchange rate between the US dollar and RMB and the increase in exchange earnings. In terms of cash flow, the operating cash flow of 2022H1 is-41.421 million yuan (- 150.97). Mainly due to the epidemic caused some customers to slow down periodically and protect production while fighting the epidemic, resulting in a substantial increase in related operating expenses and a substantial increase in payments for the purchase and locking of laboratory animals in advance. 4) quarter by quarter: 2022Q2 achieved operating income of 390 million yuan (+ 43.1%), net profit of 854.12 billion yuan (+ 25.6%) and non-net profit of 79.267 million yuan (+ 19.7%). Compared with the past few quarters, the slowdown was mainly due to the insufficient release of production capacity affected by the epidemic.

Capacity continued to expand, laying the foundation for performance growth. At present, the company has a total of 82000 square meters of R & D laboratories, of which the laboratory area that has been put into use is 67000 square meters, an increase of 19000 square meters over the same period last year, and the laboratory area under construction is 15000 square meters. In addition, 2022H1 plans to invest an additional 216000 yuan, of which 1.57 billion yuan will be used for the construction of a biomedical R & D and innovation industrial base in northwest Shanghai, and 190 million yuan for the expansion of the laboratory of the drug discovery and pharmaceutical research and application platform. New production capacity will support continued business growth in the future.

Continue to increase R & D investment, the team continues to expand. 2022H1 has a total of 2833 employees (+ 43.8%), of which 2454 are R & D personnel (+ 45.7%), accounting for 86.6% of the company's total employees. Sub-plate, drug discovery and pharmaceutical research plate, preclinical research plate R & D personnel are 1627 (+ 50.4%), 827 (+ 37.4%), more outstanding R & D personnel will significantly increase the company's drug discovery service capacity. In addition, the company's preclinical research service has accumulated many years of experience in technical research and development and project cooperation. At present, it has more than 470 mature modeling technologies. A total of 42 new drug and generic drug projects completed by 2022H1 have been approved by NMPA to enter clinical trials; 5 have been approved by FDA and TGA to enter clinical trials; the income of the project in accordance with the requirements of Sino-US double reporting standards is 310 million yuan (+ 166%), accounting for 41.7% of the company's main income. At the same time, the company currently applies for 48 intellectual property rights (+ 54.8%), of which 38 are invention patents (+ 22.6%); 31 are intellectual property rights (+ 158.3%), of which 21 are invention patents (+ 75%). The company continues to increase investment in research and development, and gradually expand the field of services.

Profit forecast and investment advice. We estimate that the EPS from 2022 to 2024 will be 6.11,9.55,14.37 yuan respectively, and the corresponding PE will be 52,33 and 22 times respectively, maintaining the "hold" rating.

Risk tips: orders are not as expected, industry competition aggravates risks, and so on.