Key points of investment

Recently, Medici released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 1,183 billion yuan (yoy -4.60%); realized net profit of 115 million yuan (yoy - 58.68%); realized net profit of 100 million yuan (yoy -62.02%); and realized net operating cash flow of -0.9 billion yuan.

Profit forecasting and rating: The company focuses on pre-clinical CRO business. The services cover drug discovery, pharmaceutical research and pre-clinical research, and provide one-stop new drug development services for global pharmaceutical companies and research institutions. Looking forward to the future, investment in pharmaceutical R&D will gradually increase, and the growth momentum of the preclinical CRO business will continue. The company has comprehensive pre-clinical drug research and development capabilities and rich R&D experience, and performance is expected to continue to grow. The company's EPS for 2023-2025 is expected to be 1.32 yuan, 1.76 yuan, and 2.21 yuan respectively, corresponding to the closing price of November 15, 2023. The price-earnings ratio is 60.4 times, 45.3 times, and 35.9 times, respectively; for the first time, coverage was given an “increase in holdings” rating.

Risk warning: risk of order fluctuations; overseas business expansion falling short of expectations; market competition risk; risk of changes in industry regulatory policies, etc.