Guobang Pharma (SH:605507) ZHESHANG SECURITIES·2024-11-29 08:23Investment Rating - The investment rating for the company is upgraded to "Buy" [8] Core Views - The company demonstrates scale advantages as a large-volume API manufacturer, with a recovery in its animal health business expected to drive performance beyond expectations [2][3] Summary by Sections Business Fundamentals - Pharmaceutical Business: Both volume and price are on the rise, with production expansion anticipated. The supply landscape for macrolide APIs is favorable, with steady demand growth. The core product, azithromycin, has seen an 11% price increase from the beginning of the year to October. The company plans to expand azithromycin production to 1,200 tons (an increase of 450 tons), which is expected to stabilize prices and enhance market share [3] - Animal Health Business: Market share is being captured, with signs of recovery. The price of florfenicol increased by approximately 14% from mid-September to November, while the price of oxytetracycline rose by about 23% from early April to November. The company is well-positioned in the animal health API sector, with a comprehensive product lineup and strong brand advantages [3] Growth vs. Cyclicality - Some market perspectives view the company as cyclical, heavily influenced by product volume and price cycles. However, this perception overlooks the company's replicable core competitive advantages. The company aims to achieve global leadership in 30 scaled products and regular production of 80 products, with a production capacity of 120 products. This strategy is expected to mitigate the impact of individual product cyclicality on overall performance [4] Competitive Strength through Scale - The company successfully built and trialed its first-phase production of oxytetracycline (1,000 tons) in 2021, and the second-phase project (1,500 tons) was successfully launched in 2023. By October 2024, the production capacity for oxytetracycline reached 2,500 tons, nearing full capacity. The company's market share for oxytetracycline exports reached 16.18% from January to September 2024, ranking second [5] Transition from Price War to Value War - The company is positioned as a "leader" in the price war, with a strong competitive edge in comprehensive efficiency. The price of florfenicol has dropped significantly since October 2021, but the company has maintained a steady increase in market share through competitive pricing and scale advantages. The production capacity for florfenicol is 4,000 tons per year, with ongoing capacity ramp-up [6][8] Earnings Forecast and Valuation - The company is expected to achieve EPS of 1.40, 1.76, and 2.18 yuan for 2024-2026, respectively. The closing price on November 28, 2024, corresponds to a PE ratio of 15 times for 2024. The company's scale manufacturing advantages and the strengthening of market share for core products are expected to drive new growth momentum [8]