ZUO LI YAO YE(SZ:300181) KAIYUAN SECURITIES·2024-07-17 08:00Investment Rating - The report initiates coverage with a "Buy" rating for the company [3]. Core Views - The company is positioned as a leader in the medicinal fungi pharmaceutical sector, focusing on the development and production of traditional Chinese medicine products, particularly those based on medicinal fungi [9][19]. - The growth model is driven by two core products: the "Wuling" series and the "Bailing" series, with a strong emphasis on innovation and market expansion [9][57]. - The company has demonstrated robust revenue and profit growth, with projected net profits of 5.05 billion, 6.32 billion, and 7.85 billion yuan for 2024, 2025, and 2026 respectively [9][50]. Financial Summary - Revenue growth from 1.805 billion yuan in 2022 to an estimated 2.453 billion yuan in 2024, reflecting a year-over-year growth rate of 26.3% [2]. - Net profit is projected to increase from 383 million yuan in 2023 to 505 million yuan in 2024, with a year-over-year growth rate of 31.8% [2]. - The gross margin is expected to stabilize around 68.6% to 69.2% from 2024 to 2026, while the net margin is projected to rise from 20.6% in 2024 to 22.5% in 2026 [2]. Business Strategy - The company has established a comprehensive production line for traditional Chinese medicine pieces, with over 1,000 product specifications [4]. - The company is actively involved in the research and formulation of national and provincial standards for traditional Chinese medicine, having completed 208 national and 127 provincial standard filings by the end of 2023 [4]. - The "Wuling" series has shown significant sales growth, with revenue increasing from 4.82 billion yuan in 2018 to 11.94 billion yuan in 2023, representing a compound annual growth rate (CAGR) of approximately 19.9% [46]. Market Position - The company holds a clear and experienced ownership structure, with the controlling shareholder holding 18.52% of the shares as of Q1 2024 [31]. - The medicinal manufacturing segment has consistently contributed over 85% of total revenue from 2018 to 2023, with a stable gross margin above 65% [37]. - The company’s products, particularly the "Wuling" series, have maintained a high gross margin of over 82% from 2018 to 2023, indicating strong profitability [54].