Investment Rating - The report maintains a "Buy" rating for the company with a target price of 25.35 CNY, based on a 65 times PE valuation for 2026 [4][9]. Core Views - The company's performance is under pressure due to the price adjustment of its core product, Ginkgo biloba extract injection, which has significantly impacted revenue and profit margins [12]. - The company is accelerating its small nucleic acid drug pipeline, which shows potential for international market expansion [12]. - Increased investment in R&D is noted, with R&D expenses projected to rise, indicating a commitment to innovation [12]. Financial Performance Summary - Revenue for 2025 is expected to decline to 3,107 million CNY, a decrease of 17.8% year-on-year, with a gradual recovery projected in subsequent years [6]. - Operating profit is forecasted to drop to 76 million CNY in 2025, reflecting a 52.0% decline, but is expected to rebound significantly in 2026 [6]. - Net profit attributable to the parent company is projected to be 57 million CNY in 2025, down 53.7% from the previous year, with a recovery anticipated in 2026 [6]. - The company’s gross margin is expected to decrease to 49.3% in 2025, with a gradual improvement in the following years [6]. R&D and Product Pipeline - The company has 42 ongoing R&D projects, including 21 innovative drugs and 21 generic drugs, with several key products in the NDA review stage [12]. - The small nucleic acid drug YKYY015 and YKYY029 are undergoing clinical trials in both China and the US, indicating strong development activity [12]. - The company has also received FDA approval for its RSV and VZV mRNA vaccines, showcasing its expanding product portfolio [12].

Core Viewpoint - The article highlights the strong performance and growth potential of Yuekang Pharmaceutical, particularly in the innovative drug sector, driven by significant R&D investments and a robust pipeline of products [4][5][17]. Financial Performance - In the first half of the year, Yuekang Pharmaceutical reported a revenue of 1.167 billion, with R&D investment amounting to 209 million, representing 17.91% of revenue, a year-on-year increase of 7.54% [4][6]. Industry Context - The innovative drug sector is recognized as one of the "new five flowers" in the current A-share technology bull market, alongside semiconductors, internet software and hardware, new energy, and robotics [5]. R&D Capabilities - Yuekang Pharmaceutical has established eleven major technology platforms focusing on nucleic acid drugs, peptide drugs, high-end traditional Chinese medicine, high-end chemical drugs, and AI drug development, making it one of the few companies with capabilities in mRNA vaccines and small nucleic acid drugs [6][8]. Product Pipeline - As of June 30, 2025, Yuekang has 42 projects in development, with 21 innovative drugs, including 12 nucleic acid drugs, 3 peptide drugs, 5 traditional Chinese medicines, and 1 chemical drug, indicating a rich and tiered pipeline [6][17]. Upcoming Drug Approvals - Three innovative traditional Chinese medicine drugs are expected to be approved soon, which will fill clinical treatment gaps and enhance Yuekang's competitiveness in the traditional medicine sector [7]. High-Value Nucleic Acid Drugs - Yuekang's subsidiary, Tianlong Pharmaceutical, is a key player in nucleic acid drug development, with significant advancements in AI target discovery and delivery systems, positioning the company with a competitive edge in the market [8][9]. Innovative Peptide Drugs - The company is developing a broad-spectrum peptide drug for coronavirus infections, which is set to enter phase III clinical trials, showcasing its innovative approach to treatment [10]. mRNA Vaccine Development - Yuekang has developed a robust mRNA vaccine technology platform, including self-replicating mRNA vaccines and unique delivery systems, which enhance efficacy and stability [11]. AI Drug Development Platform - The company has created a comprehensive AI drug development platform that streamlines the drug discovery process, significantly reducing development time and costs [12][13]. Global Expansion and Licensing Potential - Yuekang's international strategy includes establishing a global R&D team and pursuing FDA approvals early in the drug development process, indicating strong potential for overseas licensing opportunities [14][16]. siRNA Drug Development - Yuekang has two siRNA drugs in the U.S. clinical approval process, with one expected to be the first of its kind in the market, highlighting the company's innovative capabilities in gene therapy [15][16].