Event: The company released the 2024 performance forecast, in 2024, the company is expected to achieve operating income of 1.600-1.700 billion yuan, a year-on-year increase of 54.81%-64.48%, and net profit attributable to the parent company of 380-460 million yuan, a year-on-year increase of 133.22%-182.32%; The net profit after deducting non-attributable to the parent company was 380-460 million yuan, a year-on-year increase of 126.05%-173.64%.

The performance was in line with expectations, and the advantages in the peptide field continued to be realized. In terms of quarters, in 2024Q4, the company is expected to achieve operating income of about 348-448 million yuan (+7.30%-38.16%), net profit attributable to the parent company of about 0.30-110 million yuan (-58.23%-+54.10%), and is expected to achieve non-net profit of about 25-105 million yuan (-68.26%-+32.06%).

We expect the rapid growth of our performance in 2024 mainly due to: (1) some of the blockbuster commercial varieties of peptides in the self-selected product business ushered in the harvest period, showing a continuous trend of increasing volume; (2) The demand of the global peptide industry chain continued to increase, and the company's peptide API sales increased significantly year-on-year.

Self-selected products based on peptides and specialty APIs continued to grow rapidly, and small molecule CDMO showed a steady recovery trend. 1. Independent products: A number of strategic cooperation has been reached, and the release of production capacity is expected to continue to contribute to new growth momentum. 1) On the demand side, (1) cooperate with a number of leading generic drug companies in Europe to carry out oral semaglutide and tirpatide APIs; (2) Reached cooperation in liraglutide formulation and API in the North American market, and developed the first animal innovative drug peptide CDMO project; (3) Signed a strategic cooperation agreement on semaglutide preparations in the South American market, and reached a cooperation agreement on the first generic API of liraglutide preparations; (4) In the Indian market, it has reached cooperation with leading generic drug companies for the global marketing of liraglutide preparations, signed and promoted multiple oligonucleotide CDMO services, etc.; (5) Reached a strategic cooperation in the domestic market for GLP-1 innovative drug APIs and preparations. 2) On the supply side, (1) the new 601 peptide workshop will be capped ahead of schedule, and the installation and commissioning is expected to be completed by the end of 2024, achieving a peptide production capacity of 5 tons/year; (2) The new 602 peptide workshop is expected to be completed, installed and commissioned in the first half of 2025, when another 5 tons/year of peptide production capacity will be released; (3) Forward-looking layout of oligonucleotide production capacity, 705 workshop completed the capping. We expect that with the continuous advancement of the cooperation agreement and the continuous ramp-up of new production capacity, the company's independent product business is expected to continue to maintain a high growth trend. 2. C(D)MO: Large orders have been signed, and it is expected to gradually recover in 2024. With the advantages of the two technology platforms, the company has established long-term cooperative relations with well-known pharmaceutical companies such as Gilead, Inset, Zoetis and Mirati, and the CDMO long-term supply contract with a total contract value of US$102 million signed with a large European pharmaceutical company has been delivered in the second quarter, and it is expected that the pace of delivery will be greatly accelerated from the second half of the year.

Profit forecast and valuation: Considering the strong demand for the company's self-selected products, we expect the company's operating income from 2024 to 2026 to be 1.667 billion yuan, 2.353 billion yuan and 3.565 billion yuan respectively, with a growth rate of 61.29%, 41.15% and 51.52% respectively; Considering that the amortization of the company's convertible bonds, equity incentives and other expenses in 2024 is large, and the expense ratio is expected to gradually recover, we expect that the net profit attributable to the parent company from 2024 to 2026 will be 413 million yuan, 565 million yuan and 801 million yuan respectively, with a growth rate of 153.62%, 36.68% and 41.84% respectively. The company has a rich pipeline of self-selected products and a significant advantage in the C(D)MO technology platform, which is expected to bring long-term growth through the two-wheel drive of independent products + C(D)MO, and maintains a "buy" rating.

Risk warning event: There may be a risk that the public information used in the research report may be delayed or not updated in a timely manner; the risk that the production capacity increase is less than expected; the risk of loss of core technical personnel; the risk of a decline in gross margin; exchange rate fluctuation risk; The risk of raw material supply and its price increase, environmental protection and safety production risk.