Incidents:

On August 23, 2024, Ma Yinglong released the 2024 mid-year report: 2024H1 achieved operating income of 1.928 billion yuan (YoY +17.52%), net profit to mother 0.312 billion yuan (+10.85% YoY), and net profit of 0.309 billion yuan (YoY +38.32%) after deducting non-attributable net profit of 0.309 billion yuan (YoY +38.32%).

Investment highlights:

Deepen the transformation of drug line channel marketing and drive a return to growth in performance. 2024H1 achieved operating income of 1.928 billion yuan (YoY +17.52%), net profit attributable to mother 0.312 billion yuan (YoY +10.85%), and net profit not attributable to mother of 0.309 billion yuan (+38.32% YoY). 2024H1's operating cash flow was 0.225 billion, returning to normal levels.

The 2024H1 pharmaceutical side deepened channel marketing reforms, strengthened retail channel terminal marketing, established new broad channels, and deepened the potential of the third- and fourth-tier markets. Terminal output increased significantly. The revenue of the parent company of 2024H1 was 1.001 billion yuan, up 17.52% year on year. Among them, revenue from hemorrhoid treatment products increased by 22.02% year on year.

The Big Health business followed the trend of domestic products, increased the cultivation of key health varieties, and strengthened content marketing. The sales scale of representative products such as eye care products represented by the Babao Eye Cream series and sanitary wipes series products grew rapidly, driving the overall scale growth of Big Health. 2024H1 Health's revenue increased 33.27% year on year.

Accelerate the construction of medical services to empower the pharmaceutical business. 2024H1 actively expands the diagnosis and treatment network, accelerates the “National 100 Key Anorectal Specialist Co-construction Plan”, and added 9 new anorectal diagnosis and treatment centers, with a total of 89 subscribers. Relying on the diagnosis and treatment centers, it organized and carried out several large-scale free consultation tours and double surgery exchange activities to empower the hemorrhoid drug business.

Profit forecast and investment rating We adjusted the company's revenue forecast for 2024-2026 to 3.665/4.202/4.865 billion yuan, and adjusted the net profit forecast to mother to 0.562/0.647/0.747 billion yuan, corresponding to the current stock price PE of 20/17/15 times. Ma Yinglong Musk Hemorrhoid Cream and Ma Yinglong Musk Hemorrhoid Suppository have strong consumer stickiness in the field of hemorrhoid medicine, and can further improve marketing efficiency after strengthening channel control. They are optimistic about the short-term recovery and long-term growth of the company's hemorrhoid drugs, and maintain a “buy” rating.

Risks suggest that macroeconomic development falls short of expectations; progress in the construction of diagnosis and treatment centers falls short of expectations; increased industry competition; terminal sales of hemorrhoid treatment products fall short of expectations; pharmaceutical policy risks, etc.