In the first three quarters of 2024, the company achieved operating income of 3.237 billion yuan, a year-on-year decrease of 0.01%; net profit to mother of 0.53 billion yuan, an increase of 12.42% year-on-year; net profit after deducting non-return to mother of 0.521 billion yuan, an increase of 12.82% year-on-year.

Gross profit margin 54.63% (YoY +3.38pp), net profit margin 16.77% (YoY +2.19pp).

In the third quarter of the year 2024, revenue was 1.099 billion yuan, down 1.80% year on year and 0.07% month on month; net profit to mother was 0.19 billion yuan, up 12.17% year on year and 0.99% month on month; net profit after deducting non-return to mother was 0.19 billion yuan, up 14.68% year on year and 1.86% month on month. Gross profit margin 54.22% (YoY +3.79pp), net profit margin 17.74% (YoY +2.46pp).

Performance is improving month-on-month, and the company's operations are confident. The company's performance continued the good trend in the second quarter. The profit side achieved month-on-month growth in 24Q3, and the upward trend in management continued to be verified. The company clearly proposed that innovation and going overseas are the company's future development direction, building a product group and core competitiveness, and we continue to be optimistic about the company's advanced development.

Formulation: Accelerate the increase of new products, and steady progress of innovative products. In the first three quarters of 2024, the company's formulation revenue was about 1.93 billion yuan, an increase of 8% over the previous year. Mainly anaesthetic muscle relaxants, respiratory medicine, and dermatology products increased year-on-year, while generic drugs were affected by the collection of dexamethasone sodium phosphate injections, which declined year-on-year.

By major products, 1) Gynecology and Women's Health: The sales volume of the nine main products was about 0.34 billion yuan, the same as the previous year. Three new products in gynecology: norethisterone enanthate injection was about 25 million yuan, an increase of 30% over the previous year; drospirenone ethinylestradiol tablets were about 16 million yuan, an increase of 440% over the previous year; and estradiol valerate tablets have now been connected to the Internet in 6 provinces. 2) Anesthetic muscle relaxation: Sales of the 7 main products were about 0.1 billion yuan, an increase of about 20% over the previous year. Xinming formic acid injections have been included in the tenth batch of collection catalogs. 3) Respiratory Medicine: The sales volume of the three products was about 0.615 billion yuan, an increase of about 32% over the previous year. 4) Dermatology: The sales volume of the five products was about 0.188 billion yuan, an increase of about 20% over the previous year. In terms of new products, a transdermal formulation platform was gradually completed, and new products were gradually developed in the form of paste and gel paste. 5) Generic medicine: The sales volume of 13 products was about 0.43 billion yuan, down about 10% from the previous year. The new 4mg specification for methylprednisolone tablets was just approved in the third quarter of 2024.

In terms of new products: According to the company's announcement, 4 new products will be approved in the first half of 2025: didrogesterone tablets, progesterone softgels, beprost sodium tablets, and deoxyprogestinyl estradiol tablets. Expected progress of other products: progesterone gels are expected to be declared in 25Q1; CZ1S long-term analgesic injections are expected to be declared in 25Q4; 4 inhalation formulations have been set up; they are expected to be declared 1 to 2 in 25 and 1 to 2 in 2026; clinical trials for long-acting progesterone injections are expected to begin in 25 years.

APIs: Optimistic about next year's high-end market and high-end product release. In the first 3 quarters of 24, the company's API revenue was 1.3 billion yuan, down about 10% year on year; mainly, Newchem fell about 14% year on year due to inventory removal from the international API market and economic factors in some countries; sales volume of APIs in the development department declined; sales volume of proprietary APIs increased year on year. Prices of APIs in non-regulated markets were still at the bottom, and sales of proprietary APIs increased slightly compared to the same period last year. We expect the company to expand into the standardized market one after another in '25. Sterile API products have passed WHO certification this year, and it is expected that orders will gradually be placed. At the same time, a number of new cooperative projects with Newchem are expected to increase profits in the API sector.

Profit forecast and investment rating: The company's formulation side is stable, the product continues to advance, and the upgrading of the API side to the high-end drives profit increase, and the long-term value of the company is optimistic. We expect the company's net profit to be 0.7/0.85/1.05 billion yuan in 2024-2026, with a year-on-year growth rate of 24%/21%/24%, corresponding PE of 19/16/13 times, maintaining a “highly recommended” investment rating.

Risk warning: Risks such as R&D and sales falling short of expectations, negative policies, safety and environmental protection, increased industry competition, and impairment of goodwill.