Investment Rating - The report indicates a positive investment outlook for the dry eye disease treatment drug industry, with a projected compound annual growth rate (CAGR) of 10% from 2025 to 2030, and the market size expected to exceed 9.6 billion yuan by 2030 [4][31]. Core Insights - The dry eye disease treatment market in China is characterized by a dual-track competition between foreign and domestic companies, with local firms like Xingqi Eye Medicine and Hengrui Medicine gradually breaking the monopoly of foreign enterprises through independent research and development and collaborative efforts [4][10]. - The number of dry eye disease patients in China has surpassed 360 million, with an annual growth rate of 10%, indicating a continuous expansion of diagnosis and treatment demand [4][11]. - The market is shifting from reliance on traditional treatments like artificial tears to innovative therapies, including immunosuppressants and new drug delivery systems, marking a transition to a more precise and individualized treatment approach [4][17][34]. Summary by Sections Industry Definition - Dry eye disease (DED) is caused by insufficient tear production or instability of the tear film, leading to various ocular discomforts. Treatment is individualized and can include drug therapy, physical therapy, and surgical options [5]. Drug Classification - Dry eye treatment drugs can be categorized based on their mechanisms of action, including lubricating and repairing agents, anti-inflammatory drugs, and antibacterial agents [6][7][8]. Industry Characteristics - The increase in screen time among residents has led to a rise in dry eye disease cases, creating significant market potential. The market is currently dominated by artificial tears and cyclosporine eye drops [10][12]. Market Size and Growth - The market size for dry eye treatment drugs is projected to grow from 12.755 billion yuan in 2025 to 19.306 billion yuan by 2030, with a CAGR of 8.64% [31][34]. Competitive Landscape - The high-end market for dry eye treatment drugs is primarily dominated by foreign brands, but domestic companies are making significant strides through innovation and competitive pricing [41][42][43]. Policy Analysis - Recent policies aim to enhance eye health services and promote awareness of dry eye disease, which is expected to further stimulate market growth [39][40]. Industry Chain Analysis - The industry chain includes upstream raw material suppliers, midstream drug manufacturers, and downstream sales channels, with a focus on innovation and quality improvement to enhance competitiveness [18][19][20].

Core Viewpoint - The company has demonstrated significant revenue growth driven by its core products, cyclosporine eye drops and atropine sulfate eye drops, while implementing strategies to mitigate competitive pressures and optimize production capacity [1][2][3]. Group 1: Revenue Growth and Core Products - The company's revenue has consistently increased, with figures of 1.25 billion, 1.468 billion, and 1.943 billion from 2022 to 2024, and 536 million in Q1 2025, reflecting year-on-year growth rates of 32.42% and 53.24% [1]. - The net profit attributable to the parent company also rose, reaching 208 million, 240 million, 348 million, and 136 million during the same periods, with year-on-year increases of 44.54% and 285.96% [1]. - Cyclosporine eye drops, approved in June 2020 and included in the medical insurance directory in 2022, saw revenue growth from 448 million to 1.366 billion, projected to account for 100% of eye drop revenue in 2024 [1]. - Atropine sulfate eye drops, approved in March 2024, are the first product in China aimed at slowing the progression of myopia in children and are currently in a market monopoly phase [2]. Group 2: Competitive Landscape and Response Strategies - The industry is experiencing increased competition, with new products from companies like Hengrui Medicine and Kanghong Pharmaceutical expected to enter the market by mid-2025 [3]. - The company has established a comprehensive marketing system covering public hospitals, private eye care groups, retail pharmacies, and e-commerce platforms, with atropine eye drops available in approximately 17,000 retail pharmacies by mid-2025 [3]. - A professional promotion team of over 1,000 members has been formed, and core products have been included in more than 20 clinical guideline consensus documents [3]. - The company is expanding its research pipeline, with 78 projects under development, including 0.02%/0.04% concentration atropine and a biological agent for dry eye treatment [3]. Group 3: Production Capacity and Financial Health - The production capacity utilization rate for eye drops was 67.33% in 2024 and 60.37% in the first half of 2025, primarily due to new production lines ramping up and some outsourced production [4]. - The sales-to-production ratio remained high at 119.67% in the first half of 2025, indicating strong market demand [4]. - The company reported a decrease in accounts receivable turnover from 10.77 in 2022 to 8.94 in Q1 2025, but over 99% of accounts receivable are due within one year, with a collection rate of 93.73% [4]. - The company maintains a prudent approach to inventory management, with a provision for inventory impairment at 3.56%, higher than peers like Kanghong Pharmaceutical and Hengrui Medicine [4]. Group 4: R&D Investment and Future Plans - R&D expenditures from 2022 to 2024 were 190 million, 182 million, and 235 million, with capitalization ratios of 23.44%, 7.89%, and 6.22% respectively, primarily for clinical research on cyclosporine and atropine [5]. - As of June 2025, the company holds 73 invention patents and employs 271 R&D personnel, accounting for 11.17% of total staff [5]. - The company plans to raise 850 million through a private placement, with 650 million allocated for R&D center construction and 200 million for working capital, addressing current space constraints and aiming to add 280 R&D personnel over the next decade [6]. - The company clarified that adjustments to project investments were necessary due to rapid business growth, ensuring alignment with strategic planning without veering into real estate investments [6].

Core Insights - Shenyang Xingqi Eye Pharmaceutical Co., Ltd. continues to experience rapid growth in revenue and profit, with a significant increase in both metrics for the third quarter of 2025 [1] Financial Performance - For the first three quarters of this year, the company achieved operating revenue of 1.904 billion yuan, a year-on-year increase of 32.27% [1] - The net profit attributable to shareholders reached 599 million yuan, reflecting a year-on-year growth of 105.98% [1] - In the third quarter alone, the company reported operating revenue of 741 million yuan, up 35.34% year-on-year, and a net profit of 264 million yuan, which is a 117.45% increase year-on-year [1] Product Development and Market Position - The company specializes in the ophthalmic drug sector, maintaining a leading position in research and development, with a comprehensive product line [1] - Xingqi Eye Pharmaceutical has developed a diverse range of ophthalmic products, including treatments for myopia, dry eye, infections, inflammation, and glaucoma, covering ten subcategories of ophthalmic drugs [1] - The growth in revenue is primarily attributed to increased sales of eye drop products [1] Innovation and R&D Focus - Since its inception, the company has prioritized the development of new products with independent intellectual property rights as a key goal for continuous improvement and innovation [2] - Recent product approvals include cyclosporine eye drops and atropine sulfate eye drops, contributing to rapid revenue and profit growth [2] - New products such as tafluprost eye drops have received drug registration certificates, and several others are in various stages of clinical trials [2]

Core Viewpoint - The report from Dongfang Securities indicates that Xingqi Eye Medicine achieved a net profit attributable to shareholders of 335 million yuan in the first half of 2025, representing a year-on-year increase of 97.8% [1] - The strong performance is attributed to robust growth in core products such as atropine and cyclosporine eye drops, along with improved profit margins due to an optimized product mix [1] Financial Performance - The net profit excluding non-recurring items reached 331 million yuan, reflecting a year-on-year increase of 96.3% [1] - The gross profit margin improved by 2.5 percentage points year-on-year, driven by a higher proportion of high-margin product revenue [1] - The company effectively controlled expenses, with the combined expense ratio (sales, management, and R&D) decreasing by 8.7 percentage points year-on-year [1] Future Outlook - With the accelerated market penetration of low-concentration atropine, the company is expected to see accelerated growth in performance and sustained improvement in profitability [1] - Using a discounted cash flow valuation method, the estimated fair market value of the company is projected to be 19.675 billion yuan, corresponding to a target price of 80.19 yuan per share, maintaining a "buy" rating [1]

Summary of the Conference Call for Xingqi Eye Pharmaceutical Company Overview - **Company**: Xingqi Eye Pharmaceutical - **Industry**: Ophthalmic Pharmaceuticals Key Financial Performance - **Revenue**: 11.62 billion CNY in H1 2025, a year-on-year increase of 30.38% [2][3] - **Net Profit**: 3.35 billion CNY, a year-on-year increase of 97.75% [2][3] - **Dividend Proposal**: Cash dividend of 7 CNY per 10 shares, subject to shareholder approval [2][3] Research and Development Progress - **R&D Investment**: 1.0 billion CNY, an increase of 8.11%, representing 8.64% of revenue [2][4] - **Product Approvals**: - Heafluprost eye drops approved - Lidocaine eye gel in Phase III clinical trials - SQ22,031 eye drops in Phase II clinical trials for neurotrophic keratitis, listed as a rare disease drug [2][4][5] - **Innovative Products**: - 60 approved ophthalmic drugs, with 38 in the medical insurance directory and 6 in the national essential drug list [4] - SQ22,031 eye drops and SQ129 vitreous sustained-release injection under development [9] Market Strategy and Sales Performance - **Atropine Sales**: - Widely distributed in public hospitals and major private groups, covering nearly 17,000 retail pharmacies and online platforms [2][10] - Sales growth driven by a comprehensive marketing strategy and collaboration in myopia prevention [12] - **Sales Team**: Over 500 professional promotion specialists, with plans for further expansion based on market conditions [10][12] - **Market Coverage**: - Multi-channel marketing strategy including both online and offline channels [12][18] - Focus on enhancing brand influence and customer satisfaction [7][8] Future Outlook and Market Trends - **Market Potential**: - Significant growth potential in the myopia prevention market, with over 100 million schoolchildren affected [24] - Anticipated stable gross margin due to increased sales scale and operational efficiency [21] - **Product Pipeline**: - Continued focus on innovative drug development in ophthalmology, including treatments for myopia, dry eye, and other eye diseases [23][25] - Plans to expand into international markets with existing and new products [22] Additional Insights - **Quality Management**: - Achieved national-level green factory certification and implemented stringent quality control measures [6] - **Patient Compliance**: - High compliance rates among pediatric patients using atropine, with ongoing efforts to improve disease education and treatment adherence [18][19] - **Clinical Guidelines**: - Received endorsements from multiple clinical guidelines, enhancing the credibility of products like cyclosporine eye drops [20] This summary encapsulates the key points from the conference call, highlighting the financial performance, R&D advancements, market strategies, and future outlook for Xingqi Eye Pharmaceutical.

Report Summary 1. Report Industry Investment Rating No investment rating information is provided in the report. 2. Core Viewpoints - The company adheres to independent R & D, strengthens its core competitiveness, expands the market, and optimizes the customer structure. In the first half of 2025, both revenue and net profit maintained stable growth [30]. - The company's products, such as Xingqi Meiopin and Zirun, have broad market prospects. Xingqi Meiopin has a good market performance, and Zirun is expected to continue to contribute to the company's growth [30][43]. - The company will continue to increase investment in the field of ophthalmic innovative drugs, improve its independent innovation ability, and layout and develop more competitive ophthalmic innovative drug products [32]. 3. Summary by Directory 3.1. Research Basic Situation - Research object: Xingqi Eye - drops [16] - Industry: Chemical pharmaceuticals [16] - Reception time: September 1, 2025 [16] - Reception personnel: Vice - chairman and board secretary Zhang Shaoyao, director and general manager Gao E, director, deputy general manager and CFO Cheng Ya'nan, director and deputy general manager Yang Qiang [16] 3.2. Detailed Research Institutions - Many institutions participated in the research, including securities companies such as Guosheng Securities, Guotou Securities, and GF Securities; fund management companies such as Huaxia Fund, Hui'an Fund; and other types of institutions like Guojin Medicine, China International Capital Corporation [17][18]. 3.3. Main Content 3.3.1. 2025 Semi - annual Performance - Revenue in the first half of 2025 was 1.163 billion yuan, a year - on - year increase of 30.38%. Net profit attributable to shareholders of the listed company was 335 million yuan, a year - on - year increase of 97.75% [30]. - The proposed profit distribution plan for the first half of 2025 is to distribute 7 yuan in cash for every 10 shares based on the total share capital of 245 million shares, subject to the approval of the company's second interim shareholders' meeting in 2025 [30]. 3.3.2. Investor Questions and Answers - **Atropine Promotion and Sales** - Xingqi Meiopin has achieved wide coverage in in - hospital and out - of - hospital channels and received good market feedback. There are over 500 professional promotion personnel in the myopia prevention and control field, and the number will be adjusted according to relevant factors [30]. - It has been widely introduced into public hospitals and major private ophthalmic groups, and only one province has not completed drug access. As of the end of June, it has been stocked in nearly 17,000 retail pharmacies and launched on multiple platforms [31][32]. - The sales growth is driven by full - channel marketing, multi - party cooperation, and professional academic promotion. The company's core goals this year are to let over 20 million people know the myopia treatment plan and promote over one million children to receive standardized drug intervention [34][35]. - **R & D Pipeline** - The Class 1 therapeutic biological product SQ - 22031 eye drops have completed Phase I clinical trials and are conducting Phase II clinical trials for neurotrophic keratitis. The SQ - 129 vitreous slow - release injection has completed pre - clinical research and will conduct clinical trials for macular edema after approval [32]. - The company obtained the clinical summary report of "Efficacy and safety of different concentrations of atropine sulfate eye drops (0.02% and 0.04%) in delaying myopia progression in children" in October 2024, and the product is under review by the drug evaluation center [33][35]. - **Other Products and Market Outlook** - Zirun has achieved double - digit growth in the first half of 2025, and its annual sales outlook is optimistic due to the large number of dry - eye patients and its inclusion in the national medical insurance negotiation catalog [43]. - The company will continue to expand its international market for low - concentration atropine eye drops and is in the preliminary communication stage with overseas partners [46]. - The company plans to build a comprehensive R & D headquarters in the Shenyang area of the China (Liaoning) Pilot Free Trade Zone, focusing on ophthalmic R & D and equipped with top - notch R & D teams [47].