The integration of preparations has progressed smoothly and the inflection point of performance has emerged. The company has been ploughing raw materials for many years, and the preparation integration strategy has progressed smoothly. The proportion of revenue from high gross margin preparation business continues to increase, leading to a steady increase in the company's profitability, with a gross profit margin rising from 49.22% in 2015 to 61.99% of 2022H1. However, due to overseas stock consumption, rising raw material prices and other reasons, the company's net profit declined in 21 years, but in 22 years, with the lifting of the FDA ban and the stabilization of raw material prices, the performance inflection point has appeared.

The profitability of APIs is expected to improve, and the preparation business is expected to increase rapidly. In terms of API business, with the stabilization of raw material prices, the recovery of API prices, and the possible economies of scale brought about by the increase in capacity utilization after the lifting of the ban, its profitability will be improved. In terms of preparation business, overseas business began to resume after the lifting of the ban, and the approval speed of ANDA was accelerated, reaching 25 in 2022 and 87 in total. At the same time, the company actively promotes domestic R & D and registration work and participates in collection and acquisition, with the help of collection and acquisition to quickly achieve the volume of new products, the preparation business is expected to maintain a rapid growth rate.

The active layout of biological drugs and innovative drugs is expected to open up the space for growth. The company is actively adding code and innovating. At present, the biopharmaceutical plate has built an integrated macromolecular drug R & D platform, with a full life cycle R & D system from antibody discovery, CMC, pilot production, clinical trial and registration, commercial production and so on. The company accelerates the promotion of clinical project research and the transformation of R & D achievements into benefits in order to open up the growth space. By the end of 22H1, the company is studying more than 20 biological drug projects, of which 11 are in clinical trials; there are more than 10 small molecular new drugs under research, 2 in clinical research stage and 2 in preclinical research stage.

Investment suggestion: we expect the company's return net profit from 2022 to 2024 to be 11.22,13.52 and 1.621 billion yuan, an increase of 130.22%, 20.46% and 19.87% over the same period last year, and the corresponding PE is 28.62,23.75 and 19.82 times respectively. Coverage for the first time, giving a "overweight" rating.

Risk tips: the progress of R & D registration is not as expected; the bid for collection is not as expected; the recovery of overseas business is not as expected; the risk of exchange rate fluctuations.