Key points of investment

Incident: In the first three quarters of 2024, the company achieved revenue of 1.348 billion yuan (+10.95%, up 10.95% year on year, same below), net profit to mother of 0.228 billion yuan (+60.66%), net profit of 0.163 billion yuan (+33.87%); in a single Q3 quarter, the company achieved revenue of 0.438 billion yuan (+21.69%), net profit to mother 0.091 billion yuan (+158.74%), net profit not to mother The profit was 0.052 billion yuan (+52.62%), and the performance was impressive, exceeding our expectations. In Q3 of 2024, the company's non-recurring profit and loss was 0.039 billion yuan, mainly due to the disposal of the equity proceeds of Xinpan Biotechnology Co., Ltd.

Medication performance for cardiovascular and cerebrovascular diseases exceeded expectations, and the dosage of core products such as respiratory and orthopedics was steady. By industry, in the first three quarters of 2024, the company's industrial revenue reached 1.239 billion yuan, an increase of 14.31% over the previous year. Based on changes in product structure, the gross margin of the pharmaceutical industry increased by 3.13pct to 76.42%.

Specifically, in the first three quarters of 2024, cardiovascular revenue was 0.381 billion yuan (+41.28%), and the gross margin increased to 81.57% (+5.72pct). The main reason was that wheat tablets used collection opportunities to quickly release a total of nearly 4,500 institutions (including grade hospitals and primary hospitals), and achieved revenue of about 0.233 billion yuan (+100%) in the first three quarters. Orthopedic medicine achieved revenue of 0.298 billion yuan (+11.03%) in the first three quarters of 2024, and sales of garcinia huangjianjianbone tablets increased steadily. Among them, the total sales volume of garcinia huangjian bone tablets covered more than 1,000 public institutions, and achieved revenue of about 86 million yuan (+340%) in the first three quarters. After the collection price reduction of garcinia huangjianjianjianjianji tablets, volume increased 14% in the first three quarters, and completed the coverage of nearly 8,400 public medical institutions. In the first three quarters of 2024, respiratory medicine achieved revenue of 0.183 billion yuan (+17.11%), and sales of the core products Strong Loquat Cream (Honey) and Strong Loquat Lotion were good.

An innovative pediatric traditional Chinese medicine product, Pediatric Jingxing Cough Relief Granules, has been admitted to a total of 1,500 hospitals, achieving revenue of about 60 million yuan (+130%) in the first three quarters of 2024.

Continued focus on the field of traditional Chinese medicine innovation, and profitability has been steadily improving. The company continued to focus on the main Chinese medicine industry. The medical business and other revenue fell 27.59% year-on-year in the first three quarters of 2024, mainly due to Chongqing Xiaopanda Pharmaceutical Co., Ltd. not being included in the scope of the merger after April 2024, and the non-core business was further divested. In the 2024 Q3 order, the company's gross margin was 73.26% (+4.27pct, up 4.27 percentage points from the same period last year, same below), mainly due to an increase in industrial revenue and gross margin. Core products, especially drugs for chronic diseases, showed a steady growth trend; net sales interest rate of 20.96% (+11.35pct), net sales margin was 11.87% (+2.43pct), and the sales expense ratio increased to 9.60% (+3.93pct).

Profit forecast and investment rating: Considering the confirmation of the company's investment income for the third quarter, we raised our 2024 net profit forecast from 0.242 billion yuan to 0.279 billion yuan, maintaining the forecast of 0.312/0.396 billion yuan for 2025-2026, and PE corresponding to the current market value is 19/17/13X. Maintaining a “buy” rating? Risk warning: industry policy risks, increased risk of market competition, risk of R&D falling short of expectations, etc.