Investment Points

Event: The Company has released its 2023 Annual Report and 2024Q1 earnings forecast. In 2023, the company realized a revenue of 1.034 billion yuan (+58.69%, with the same increase, the same below), a net profit of 0.163 billion yuan (+26.20%) and a net profit of 0.168 billion yuan (+102.31%) after deducting non-return. According to preliminary calculations by the financial department, 2024Q1 is expected to realize a net profit of 0.55-0.07 billion yuan, up 161.74-233.13 year on year. Net profit after deducting non-return is 0.55-0.07 billion yuan, year-on-year increase of 135.22-199.37%. The company actively promote production capacity construction, matrix BD quality expansion, performance to achieve rapid growth.

independent selection of products continued rapid volume, high-quality production capacity is highly competitive. (1) In terms of independent selection of products, revenue will reach 0.629 billion yuan (+145.48%) in 2023, accounting for 60.83% of revenue. Gross margin is 64.43%(+3.27pp), a new high. Subdivided projects, in 2023 API and intermediates to achieve revenue of 0.416 billion yuan (-141.16%), preparations to achieve revenue of 0.213 billion yuan (-154.34%). The continuous rapid release of independent products and the continuous improvement of gross profit margin are mainly due to the company's competitive advantages in the production capacity, product quality and production cost of polypeptide APIs. At present, the production capacity of polypeptide bulk drugs has reached the tonnage scale. With the new planned production workshop gradually put into production, the production capacity of polypeptide bulk drugs is expected to reach several tonnes by the end of 2025. The company has obtained FDA First Adequate Letter for bulk drugs such as selaglutide and liraglutide, which can meet the reporting requirements of downstream preparation customers. The single batch output of several long-chain modified polypeptide bulk drugs such as selaglutide has exceeded 10kg, which is at the leading level in the industry.

(2) In terms of customized products and services, the revenue will reach 0.404 billion yuan (+3.07%) in 2023, with a steady rise throughout the year. With strong R & D strength and complete technical system, the company has established a solid cooperative relationship with well-known pharmaceutical enterprises at home and abroad, and the customer stickiness is good; in terms of production capacity, the multifunctional GMP workshop of Jiande production base phase II has been put into operation, with a total new production capacity of 180000 liters, which can provide the hardware foundation for the company to undertake higher value-added GMP projects.

(3) in terms of emerging businesses, the subsidiary Noteno was established in July 2022 to lay out the field of oligonucleotide technology. at present, the GMP pilot production line has been successfully put into production, which can meet the transfer of the company's oligonucleotide and polypeptide processes from research and development to pilot amplification. In 2023, Noteno and its net profit was 6.4367 million yuan, which has made a profit.

BD team refresh, matrix expansion results significantly. At present, the company has established a high-end BD team system with management as the core. Through matrix BD expansion, the company has fully covered the markets of China, Europe, America and the Asia-Pacific region, and has newly opened up important customers in Brazil, Greece, Italy, Canada, Japan and South Korea. The quality of the customer structure has risen. In 2023, BD of the company achieved fruitful results: signing the CDMO contract for the GLP-1 of innovative drug bulk drugs in China, and agreeing on the stepped supply price of bulk drugs after the preparation is listed in China; Signing the European regional strategic cooperation agreement for Simaglutide Injection, and achieving a win-win situation by providing sales shares for Simaglutide bulk drugs. Sign the Latin American regional strategic cooperation agreement for Simaglutide bulk drugs, and designate the customer to purchase and promote the products after listing; signed a long-term CDMO supply contract with a large European pharmaceutical company for a total amount of US $0.102 billion, and began to supply step-by-step in 2024.

investment advice: the company's polypeptide API depth layout, continue to strengthen technological innovation, with the orderly progress of production capacity construction, matrix BD accelerated expansion, the company's performance is expected to continue the high growth trend. We raised our original earnings forecast and expected the company's net profit for 2024-2026 to be 2.22/3.12/0.444 billion yuan (2024-2025 years ago value of 1.82/0.247 billion yuan), a growth rate of 36%/41%/42%; The corresponding PE is 52/37/26 times. Maintain "Buy-A" recommendation.

risk tips: industry policy risk, market competition increased risk, research product listing uncertainty risk, environmental risk, commercialization less than expected risk.