The “Share Transfer Agreement” was signed, and the actual controller was changed to China Resources. On August 4, 2024, Tianshili Group, the controlling shareholder of the company, and its co-actors signed a “Share Transfer Agreement” with China Resources 39. They intend to transfer a total of 0.418 billion shares held by China Resources 39 to China Resources 39 through an agreed transfer agreement, accounting for 28% of the company's total share capital. The transfer price is 14.85 yuan/share, and the total transfer price is 6.212 billion yuan. Furthermore, the Tasley Group agreed to promise to relinquish voting rights corresponding to 5% of the shares held by it after the registration date of the shares transferred to China Resources 39, so that it controls no more than 12.50% of the voting rights ratio. At the same time, Tasley Group plans to transfer 0.075 billion shares of the company's shares to Guoxin Investment through an agreed transfer agreement, accounting for 5% of the company's total share capital. The transfer price is 14.85 yuan/share, and the transfer price is 1.109 billion yuan. After the equity change is completed, the controlling shareholder of Tianshili will be changed from Tianshili Group to China Resources 39, and the actual controller will be changed to China Resources.

Strong United Nations assets have taken over to consolidate the company's innovative advantage. Both China Resources Pharmaceutical and Tianshili Group are leading companies in the Chinese pharmaceutical industry. The strategic layout of the two parties is highly compatible. They will use a joint venture as the carrier to carry out the iterative upgrade of the world's first multi-modal large-scale model of traditional Chinese medicine research and development, “Digital Intelligence Materia Medica”, combining traditional Chinese medicine theory and clinical experience with digital technology to establish a new paradigm for digital traditional Chinese medicine research and development. The two sides will establish a drip pill technology innovation consortium to promote the iterative upgrading of drip pill technology; and build the company into a high-tech, high-quality specialized production base for new Dripping pill dosage forms to provide industrialized services to more enterprises. As a state-owned capital operating company, China Guoxin will perform resource allocation functions to promote the optimization of the company's industrial layout and scientific and technological innovation. At the same time, China Resources 39 and Tianshi Li will empower each other, making the company's innovation advantages more prominent and its position as an innovation leader more stable. The two sides will give full play to the synergy of the traditional Chinese medicine industry chain, repair and strengthen the chain more quickly, and enhance the competitiveness of the entire industry chain.

The company's traditional Chinese medicine research and development pipeline is outstanding, and it is expected that the strong will become stronger. In 2023, the company's R&D investment accounted for 17.73% of the pharmaceutical industry's revenue. As of the end of 2023, it had 98 R&D pipelines for products under development, including 25 modern traditional Chinese medicine products, including 18 Class 1 innovative drugs; in the modern traditional Chinese medicine R&D pipeline, loquat lung cleansing drink and Wenjing soup have submitted production applications, and 19 products are in phase II and III clinical research stages, covering cardiovascular, digestive metabolism, tumors, central nervous system, etc. The company's traditional Chinese medicine research and development pipeline is outstanding, and against the backdrop of accelerated subsequent approval of traditional Chinese medicine, the company is expected to continue to deliver results.

Profit forecasting and investment ratings. The company's net profit for 2024-2026 is expected to be 1.189 billion yuan, 1.309 billion yuan, and 1.435 billion yuan respectively, with year-on-year growth rates of 11.0%, 10.1%, and 9.7% respectively. Corresponding PE is 19X/17X/16X, respectively, maintaining a “buy” rating.

Risk warning: The company's product volume is lower than expected; there is a risk of product price reduction, and R&D progress falls short of expectations.