Incident: On January 30, 2024, the company released the main operating data for 2023. According to the company's preliminary accounting, revenue in 2023 increased by about 13% year on year, and net profit to mother increased by about 18% year on year.

Performance has grown steadily, and the investment value of “high dividends+state-owned enterprises” has been highlighted. In 2023, the company's revenue increased by about 13% year on year, net profit to mother increased by about 18% year on year, and double-digit performance increased steadily. On January 24, the Information Office of the State Council held a press conference focusing on enhancing core functions, enhancing core competitiveness, and better achieving high-quality development of central enterprises. It is proposed that the State Assets Administration Commission will further study and incorporate market value management into the performance assessment of central enterprise heads, guide central enterprise leaders to pay more attention to the market performance of controlled listed companies, promptly convey confidence and stabilize expectations through the application of market-based holdings increase and repurchases, increase cash dividends, and better return to investors. We counted the annual dividend amount/net profit ratio. The average value of Jiangzhong Pharmaceutical in 2021 and 2022 was 114.90%, ranking second in the Shenwan Traditional Chinese Medicine II industry. As a representative of “high dividend+state-owned enterprise”, the company's long-term investment value is outstanding.

State-owned enterprise reform has achieved remarkable results, promoting high-quality and sustainable development of the company. In January 2024, the “Digital Transformation of Finance Based on Value Creation in China Resources River” won the second prize of the 2023 (9th) State-owned Enterprise Management Innovation Achievement Award, which fully reflects the company's innovative practices on the path of digital financial transformation and lays a solid foundation for accelerating the construction of a first-class financial management system. In December 2023, “China Resources Jiangzhong Green Intelligent Manufacturing and Ecological Civilization Construction Innovation Practice” won the third prize of the “2023 China Enterprise Reform and Development Outstanding Achievements”. The company vigorously promoted intelligent manufacturing, digital transformation and upgrading, and established the “Five in One” green intelligent manufacturing high-quality development strategy and the “Jiangzhong 441 Working Method” for energy saving and emission reduction. The green level of key production and operation indicators such as per capita production efficiency, 10,000 yuan output energy consumption, and carbon emission intensity improved significantly.

Investment advice: Jiangzhong Pharmaceutical is a high-quality brand OTC enterprise, focusing on the gastrointestinal field, supplementing and improving categories such as cough, cough, rehabilitation, nutrition, etc., and actively explores online channels through “endogenous+epitaxial” two-wheel drive. We are optimistic about the company's future revenue growth and collaborative optimization under China Resources's management system through category expansion and channel strengthening. The company is expected to achieve revenue of 43.22/5133/6.024 billion yuan in 2023-2025, up 13%/19%/17% year on year; achieve net profit to mother of 7.02/8.18/953 million yuan, up 18%/17%/16% year on year, respectively; and corresponding PE valuations are 17/15/12X, maintaining an “increase” rating, respectively.

Risk warning: macroeconomic fluctuation risk; policy risk; increased industry competition; risk of cost fluctuations; product promotion falling short of expectations; R&D risk.