Ellis released the third-quarter report of 2023, Ellis 2023 first three-quarter operating income of 1.35 billion yuan, year-on-year + 160%; return to the mother net profit of 410 million yuan, + 661%; deduction of non-return net profit of 380 million yuan, + 1869% year-on-year.

In the single quarter of Q3, Alex's revenue was 600 million yuan, + 176% year-on-year, + 27% month-on-month; net profit from home was 200 million yuan, + 644% year-on-year, + 16% month-on-month; net profit from non-return mother was 196 million yuan, + 1227% from the same period last year, up 20% from the previous year.

Vumetinib rapid volume, good cost control, driving the rapid growth of revenue and profit. After the company's core product Vumetinib mesylate first-line indication treatment was incorporated into the national health insurance catalogue, sales continued to increase, and the overall business income increased by a large margin. At the same time, due to the continuous expansion of the company's sales scale, the scale effect gradually appeared. In the single quarter of 23Q3, Alex's gross profit margin was 96.3%, an increase of 0.5% compared with 23Q2. The rate of sales expenses is 45.8%, an increase of 1.5% compared with 23Q2; the rate of management expenses is 4.9%, which is 1.8% lower than that of 23Q2; and the rate of R & D expenses is 13.1%, an increase of 2.5% compared with 23Q2. The cost is well controlled and the profit side is growing rapidly.

Fumetinib indications continue to expand, laying the foundation for the rapid development of the company. In terms of pipeline development, the adjuvant therapy indications of vermetini are currently in phase III clinical trials; the II phase registration clinical study of exon 20 insertion mutation second-line therapy indications is under way; the III phase registration clinical study of exon 20 insertion mutation first-line therapy indications is currently under way; and the combination of vermetini and FAK small molecule inhibitor IN10018 in the treatment of advanced NSCLC is currently in the Ib/II phase. Phase Ib/II clinical trials of fumetinib combined with RC108 antibody coupling drugs in the treatment of advanced NSCLC are currently under way; first-line III phase clinical trials of adult patients with locally advanced or metastatic NSCLC with EGFRPACC or EGFRL861Q mutations were approved in August 2023.

It is expected that Fumetinib will continue to make breakthroughs in new indications, laying the foundation for the long-term development of the company.

Maintain the "highly recommended" investment rating. We are optimistic about the rapid volume potential and follow-up indications of vermetini, the main product of Alex. We estimate that the company's operating income in 2023-25 is 1.96 billion yuan, 2.57 billion yuan and 3.07 billion yuan respectively, which is + 148%, + 31% and 20% respectively compared with the same period last year. The net profit of returning home is 610 million yuan, 860 million yuan and 1.06 billion yuan respectively, and the year-on-year net profit is + 37%, + 41% and + 23% respectively. The corresponding PE is 27x, 19x and 15x respectively, maintaining the "highly recommended" investment rating.

Risk hint: research and development is less than expected risk, product sales are less than expected risk, competition aggravates risk, unban related risk.