event:

on August 29, the company released its 2023 mid-year report. in the first half of 2023, the company realized operating income of 3.076 billion billion yuan, up 4.77 percent year-on-year, net profit of 0.425 billion billion yuan, down 10.27 percent year-on-year, and net profit of 0.361 billion billion yuan, down 12.69 percent year-on-year. In the second quarter, revenue was 1.77 billion yuan in a single quarter, up 5.35 percent from the same period last year, net profit attributable to parent company was 0.224 billion yuan, down 18.05 percent from the same period last year, and net profit attributable to non-parent company was 0.21 billion yuan, down 8.91 percent from the same period last year.

comments:

product mix gives full play to differentiation advantages, medical terminal business recovers strongly 2023H1 company's raw material business realized revenue of 0.567 billion yuan, up 23.20 year-on-year, accounting for 18.45 of the company's main business revenue. Among them, pharmaceutical grade accounted for 38.90, pharmaceutical grade hyaluronic acid raw material gross margin remained at a high level of 85.29. The growth rate of pharmaceutical grade raw materials is obvious. Thanks to the company's efficient internationalization strategy, sales in Europe, Asia, America and other places have achieved sustained growth. The medical terminal business realized an income of 0.489 billion billion yuan, up 63.11 percent year-on-year, accounting for 15.90 percent of the company's main business income and a gross profit margin of 82.30 percent. Among them, the income of skin medical products reached 0.326 billion billion yuan, up 56.76 year on year.

Runzhi micro-cross-linked doll needle continues to create industry explosive products with the promotion idea of compliance, long-term and versatile. Functional skin care products business revenue of 1.966 billion billion yuan, down 7.56, accounting for 63.92 of the company's main business income. The functional food business realized a revenue of 32.91 million yuan and returned to the strategy of large single products.

R & D has been increased to continuously enrich the product matrix

in the first half of 2023, the company's R & D investment reached 0.187 billion yuan, up 4.04 year on year. With the support of the synthetic biology research and development platform or the pilot results transformation platform, in the first half of 2023, the company launched a total of 4 new products of bioactive raw materials: BioyouthTM-EGTPure ultra-pure ergothioneine, HybloomTM microtrue, UltraHA?-CWS sodium hyaluronate (cold water instant), GabarelaxTM-UP (upgraded) GABA. The trial production of recombinant human collagen, micro-crosslinked hyaluronic acid powder product HyacrossTL200, Hyatrue? sodium hyaluronate (MD Ⅱ-L, MD Ⅱ-R), cationic HA, lipopeptide, enzymatic sialic acid, and poly-oligonucleotide has been completed. Salidroside, glycerol glucoside, human milk oligosaccharides and carnosine entered the pilot stage. The company continues to promote the listing of new raw material products and implement the strategic layout of synthetic biology.

New production capacity layout, continuously expanding the company's moat

2023H1 company's sterile grade HA production line has completed equipment installation, and is expected to be officially put into use in the second half of 2023, further consolidating the leading position of HA in the most high-end market. The Science and Technology Industrial Park (Phase I) built in Haikou National High-tech Zone has been completed in 2023H1 and is expected to be officially put into use in the second half of 2023. The industrial park is a "bio-intelligent factory" integrating "informatization, data and intelligence", which helps to improve the company's layout in medical devices, regenerative medicine and international business.

earnings forecast: we expect the company's operating income from 2023 to 2025 to be 74.66/95.17/11.517 billion yuan respectively, and the net profit attributable to the parent company to be 11.72/15.27/1.943 billion yuan respectively, maintaining the "buy" rating.

risk tips: new product development risk, new product registration risk, new technology substitution risk, new product substitution risk, core technical staff loss risk, trade secrets and core technology leakage risk