Event: The company released its quarterly report for 2022. It achieved operating income of 249 million yuan (+16.1%), net profit attributable to shareholders of listed companies of 30.88 million yuan (+21.73%), and net profit attributable to shareholders of listed companies after deduction of 29.73 million yuan (+19.55%).
The performance is in line with expectations, and relatively rapid growth is still expected throughout the year. Amidst the spread of the epidemic, the company's first-quarter results maintained steady growth, in line with expectations. The company implemented an equity incentive plan in 2021, granted a total of 3.17 million shares to 60 core management and technical personnel, and determined different unlocking ratios based on performance completion. Driven by the volume of existing products, we believe that future completion or even exceeding performance targets is a probable event. Currently, three new drug products have completed phase III clinical trials: Longcen Pelvic Soothing Granules, Bacgor Jieyin Gel, and Shuhuitong Granules; a number of classic prescriptions are being studied, covering fields such as gynecology, pediatrics, pulmonology, and chronic diseases. The company also has 445 varieties of traditional Chinese medicine formula granules, completed 60 national standard filings, and has a rich variety reserve. At the same time, the company is actively promoting the “Traditional Chinese Medicine Formulation Granule Construction Project” and the “Gel and Compound Production Line Construction Project”. With the launch of innovative products and the release of production capacity, the company will add multiple performance growth points.
Core varieties are growing rapidly, and the expansion of OTC channels opens up room for growth. The sales amount and market share of the company's core gynecology varieties Kuntai capsules and bitter ginseng gel in recent years have shown a continuous upward trend in recent years. We believe, firstly, thanks to the remarkable clinical efficacy of the product, the accumulation of sufficient evidence-based medical evidence, and the gradual increase in clinicians' trust and recognition of the product; secondly, the company insists on driving the OTC channel market through clinical efficacy, strengthening brand building, and increasing the coverage and single-store output of pharmacy chains. Currently, the company's OTC channel accounts for about 30%. There is still a lot of room for improvement in the amount and share of OTC channel sales in the future, and the company's ability to withstand policy risks will be further strengthened.
Profit forecasts and valuations. We believe that the company's core products have entered the stage of steady growth in sales on the hospital side and rapid sales on the OTC side. The company's revenue for 2022-2024 is estimated to be 1,237, 15.58 and 1,934 billion yuan respectively, with year-on-year growth rates of 27.6%, 25.9% and 24.1% respectively; the net profit of the mother is 1.31, 1.71 and 221 million yuan respectively, with year-on-year growth rates of 30.7%, 29.9% and 29.6% respectively. Based on the closing price of April 29, the corresponding PE was 17.3, 13.3 and 10.3 times respectively, covering the “buy” rating for the first time.
Risk warning: collection and price reduction of proprietary Chinese medicines; R&D progress falls short of expectations; the epidemic affects product sales.