Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of 83.65 RMB [7][5]. Core Views - The company has shown resilient growth despite industry pressures, with revenue and net profit for the first three quarters of 2025 reaching 47.7 billion RMB and 12.7 billion RMB, respectively, reflecting year-on-year growth of 4% and 11% [1]. - The company is expected to continue its double-digit growth in the Ejiao series, driven by online channel expansion and consumer recovery [2]. - The company is accelerating its expansion in the tonic product category, with strategic partnerships in various product lines, aiming to transition from a leader in Ejiao to a leader in comprehensive tonics during the 14th Five-Year Plan period [3]. Financial Performance - The sales, management, and R&D expense ratios for the first three quarters of 2025 are 35.2%, 6.1%, and 3.0%, respectively, indicating a continuous optimization in sales expenses and an increase in R&D expenses due to strategic investments [4]. - The operating cash flow for the first three quarters of 2025 is 13.1 billion RMB, slightly higher than net profit, indicating strong cash flow management [4]. Earnings Forecast - The report projects net profits for 2025, 2026, and 2027 to be 18.0 billion RMB, 20.5 billion RMB, and 23.2 billion RMB, respectively, with year-on-year growth rates of 15%, 14%, and 13% [5][11].

Core Insights - Dong'e Ejiao reported a revenue of 4.766 billion yuan and a net profit of 1.274 billion yuan for the first three quarters of 2025, marking a year-on-year increase of 10.10% and 10.58% respectively, after excluding retrospective adjustments [1][4] - The company has achieved five consecutive years of high growth since 2020, positioning itself as a benchmark in the traditional Chinese medicine industry [2][3] - The company is implementing the "1238" development strategy under the leadership of Chairman Cheng Jie, focusing on expanding into the health consumption market with new products [2][9] Financial Performance - In the first three quarters of 2025, after retrospective adjustments, revenue growth was 4.41% and net profit growth was 10.53% [4] - Despite the technical decline in revenue growth due to adjustments, the net profit growth remained in double digits, indicating strong operational quality [4] - The company completed a share acquisition in July 2025, which affected financial metrics due to the consolidation of financial statements [3][4] Market Position and Strategy - Dong'e Ejiao is a leading brand in the Chinese herbal medicine sector, with a market share exceeding 70% in the ejiao block category and over 25% in the compound ejiao syrup category [9][10] - The company is diversifying its product offerings, including health products targeting men's health, and has launched several new products in recent years [2][10] - The "1238" strategy emphasizes dual-driven development in pharmaceuticals and health consumer goods, aiming to create a second growth curve [9][10] Leadership and Collaboration - Chairman Cheng Jie has been appointed as the executive director and president of China Resources Pharmaceutical Group, enhancing collaboration between Dong'e Ejiao and the state-owned enterprise [6][7] - Cheng's leadership has contributed to the company's robust growth, with a compound annual growth rate of 21.28% in revenue and 41.29% in net profit over the past three years [7][8] - The integration of resources and expertise from the parent group is expected to support Dong'e Ejiao's sustainable development [8][9] Innovation and Product Development - The company is focusing on innovation in product development, collaborating with universities to establish a scientific evidence system for new product development [11] - New product launches include red ginseng and other health supplements, aimed at enhancing market presence and addressing consumer needs [10][11] - Dong'e Ejiao's strategy includes balancing traditional strengths with innovative breakthroughs to navigate market challenges [11]

Summary of Dong-E E-Jiao Conference Call Industry and Company Overview - Dong-E E-Jiao operates in the traditional Chinese medicine industry, focusing on the production and sale of various health products, particularly those based on donkey-hide gelatin [2][3]. Key Points and Arguments Business Performance - The company has maintained a medium to high growth rate in its main business, with a significant dividend payout ratio that attracts investors [2][3]. - In 2025, Dong-E E-Jiao achieved double-digit growth, with notable improvements in accounts receivable and cash flow, entering a positive cycle that supports its sustainable dividend policy [3]. Product Portfolio and Market Performance - **E-Jiao Blocks**: Account for 40%-50% of sales, with a market share exceeding 40%. Since 2019, this product has entered a rapid growth phase, establishing significant competitive barriers through online and offline channel expansion [4]. - **Compound E-Jiao Syrup**: Represents 30% of sales and has seen rapid growth due to promotion through high-level clinical evidence, particularly in tumor auxiliary treatment. Sales increased following adjustments to the medical insurance catalog [4]. - **Peach Blossom Princess**: Contributes 10% to sales, marketed as a snack product. Sales reached approximately 500 million yuan in recent years, enhanced by online and offline activities and celebrity collaborations [4]. - **E-Jiao Powder**: Accounts for 3%-5% of sales, designed similarly to instant coffee, catering to the convenience needs of younger consumers [4]. Channel Strategy - Since 2020, the company has expanded from a single OTC channel to a full-channel layout, enabling online and offline synergy. Offline strategies include experience centers and academic promotions in collaboration with leading partners, while online efforts focus on reaching younger demographics through new products [6]. - The company collaborates deeply with around 80,000 large and medium-sized pharmacies nationwide, enhancing its bargaining power and providing potential for future growth [6]. Incentive and Dividend Policies - Dong-E E-Jiao has implemented an equity incentive plan aimed at maintaining a 15% growth rate. The current cash flow situation indicates a strong dividend yield, making it an attractive option for investors [7]. Other Important Insights - The introduction of the Royal Weichang series focuses on male health, including products like brain and kidney supplements, indicating diversification in the product line [5].

Core Insights - The Chinese ejiao industry has experienced significant fluctuations in retail terminal sales, with a notable increase in 2023 followed by a projected decline in 2024 [3][5] - Major ejiao manufacturers are rapidly expanding their online sales channels to adapt to the growing e-commerce landscape and changing consumer behaviors [6][9] Sales Performance - In 2023, the retail terminal sales of ejiao reached approximately 6.5 billion yuan, marking an 11.8% year-on-year increase, the highest growth rate in six years [3] - The retail terminal sales of compound ejiao paste in 2023 were 2.017 billion yuan, reflecting a 41.3% year-on-year growth, but are expected to decline to 1.7 billion yuan in 2024 [5] Sales Channels - The primary sales channels for ejiao products include hospitals, supermarkets, retail pharmacies, direct specialty stores, and online e-commerce platforms [1] - East Ejiao has focused on building and maintaining online sales channels, achieving over 30% year-on-year growth in sales GMV for its products in the first half of 2024 [1][9] - Other manufacturers, such as Fupai Ejiao, are also leveraging online sales strategies, including live streaming and community marketing, to enhance their market presence [9] Manufacturer Strategies - East Ejiao emphasizes a multi-channel approach, integrating online and offline sales to reach a broader consumer base, particularly younger demographics [9] - Fupai Ejiao has developed a comprehensive online and offline strategy, including partnerships with live streaming influencers and community marketing initiatives [9] - Tongrentang has expanded its offline presence with 1,270 stores across 190 cities and is actively engaging in online platforms like Tmall and JD Health [10] Market Outlook - The overall outlook for the ejiao market indicates a challenging environment in 2024, with expected declines in sales due to weaker consumer demand and a sluggish retail pharmacy sector [3][5]

Core Insights - The company achieved a revenue of 5.921 billion yuan in 2024, representing a year-on-year growth of 25.57% and a net profit attributable to shareholders of 1.557 billion yuan, up 35.29% [1] - The company is driven by a dual engine of pharmaceutical and health consumer products, with significant growth in its core product lines [2] - The company has introduced an employee stock incentive plan to enhance talent attraction and promote long-term high-quality development [2] Financial Performance - In 2024, the company reported a net operating cash flow of 2.171 billion yuan, reflecting an 11.13% increase year-on-year [1] - The basic earnings per share (EPS) for 2024 was 2.42 yuan, marking a 35.20% increase compared to the previous year [1] - The company maintained a strong financial structure with a debt-to-asset ratio of 21.05% and cash reserves of 5.015 billion yuan at the end of the year [2] Business Segments - Revenue from the company's Ejiao and related products reached 5.544 billion yuan, a year-on-year increase of 27.04%, with a gross margin of 73.61% [2] - Other pharmaceuticals and health products generated revenue of 236 million yuan, up 26.19% year-on-year [2] - The company experienced a decline in revenue from donkey breeding and sales, which amounted to 69 million yuan, down 28.92% [2] Growth Initiatives - The company launched a stock incentive plan, proposing to grant up to 124.72 million restricted shares, representing 0.19% of the total share capital, to 179 key personnel [2] - The performance targets for the incentive plan include a compound annual growth rate of net profit attributable to shareholders of no less than 15% from 2025 to 2027 [2] - The company has a history of high dividends, with a mid-year dividend of 737 million yuan in 2024, representing 99.77% of the net profit attributable to shareholders for the first half of the year [2] Investment Outlook - The company is expected to achieve EPS of 2.87 yuan, 3.40 yuan, and 4.02 yuan for the years 2025 to 2027, with corresponding dynamic P/E ratios of 21.91, 18.53, and 15.66 [3] - As a leader in the Ejiao industry, the company possesses strong brand barriers and is anticipated to achieve steady growth in performance [3]

Core Viewpoint - Dong-E E-Jiao Co., Ltd. has shown strong financial performance in 2024, driven by dual growth in pharmaceutical and health consumer products, leading to a buy rating from Zhonghang Securities [1][5]. Financial Performance - In 2024, the company achieved operating revenue of 5.921 billion yuan, a year-on-year increase of 25.57% - The net profit attributable to shareholders reached 1.557 billion yuan, up 35.29% - The net profit after deducting non-recurring gains and losses was 1.442 billion yuan, an increase of 33.17% - Operating cash flow net amount was 2.171 billion yuan, growing by 11.13% - Basic earnings per share were 2.42 yuan, reflecting a growth of 35.20% [1][2]. Business Segments - Revenue from E-Jiao and related products was 5.544 billion yuan, up 27.04%, with a gross margin of 73.61% - Other pharmaceuticals and health products generated 236 million yuan, a growth of 26.19% - Revenue from donkey breeding and sales decreased by 28.92% to 69 million yuan - E-Jiao blocks saw double-digit growth, while compound E-Jiao syrup achieved over 50% growth, with the medical market outpacing retail - The core health consumer brand, Taohua Ji, expanded by over 10% through partnerships with leading health snack brands - E-Jiao powder experienced a remarkable growth of over 75% through focused branding and digital marketing strategies [2]. Incentive Plan - On January 10, 2025, the company announced a restricted stock incentive plan, proposing to grant up to 1.2472 million shares, accounting for 0.19% of total equity - The initial grant price is set at 37.22 yuan per share, targeting 179 individuals including directors and key personnel - Performance targets include a compound annual growth rate of net profit of no less than 15% from 2023 to 2025-2027, and net asset returns of at least 11.50%, 12.00%, and 12.50% for the respective years [3]. Dividend Policy - The company maintains a strong financial structure with a debt-to-asset ratio of 21.05% and cash reserves of 5.015 billion yuan - In September 2024, the company executed its first-ever interim dividend, distributing 737 million yuan, which is 99.77% of the net profit attributable to shareholders for the first half of 2024 - The annual dividend plan for 2024 is approximately 818 million yuan, representing 99.70% of the undistributed net profit for the year [4]. Investment Outlook - The company is expected to achieve earnings per share of 2.87 yuan, 3.40 yuan, and 4.02 yuan for 2025-2027, with corresponding dynamic price-to-earnings ratios of 21.91, 18.53, and 15.66 - As a leader in the E-Jiao industry, the company possesses strong brand barriers and is anticipated to achieve steady growth, leading to a buy rating [5].