Key points of investment
Performance in the third quarter exceeded expectations, and profit growth was impressive. The first three quarters of 2022 achieved revenue of 1,819 million yuan, an increase of 15.67% over the previous year, and net profit returned to the mother of 462 million yuan, an increase of 45.1% over the previous year, and achieved net profit of 452 million yuan after deducting non-net profit of 452 million yuan, an increase of 49.13% over the previous year. Q3 2022 achieved revenue of 594 million yuan in a single quarter, an increase of 5.79% over the previous year. The slowdown in revenue side growth was mainly due to the divestment of environmental protection business in November 2021 and the higher Q3 base in 2021, net profit of 158 million yuan, up 76.36% year on year, after deducting non-net profit of 155 million yuan, up 90.91% year on year. The main reasons why profit growth was significantly higher than revenue growth include the announcement of environmental protection business, an increase in the share of the pharmaceutical industry, and the increase in net interest rate of Dyne Pharmaceutical in a single quarter, a year-on-year increase of 79.82%. 13.59pct, net interest rate 49.62%, year-on-year increase of 19.32pct, sales expense ratio 15.13%, year-on-year decrease of 5.63pct, management expense ratio 4.18%, year-on-year decrease 2.08pct, R&D expenditure rate 3.06%, and a year-on-year decrease of 1.01pct.
The profit growth of Dyne Pharmaceuticals was high, and its performance exceeded expectations. Dyne Pharmaceutical achieved revenue of 1,605 million yuan in the first three quarters, an increase of 40.47% over the previous year, and achieved net profit of 831 million yuan, an increase of 48.52% over the previous year, continuing the high growth trend. Q3 achieved operating income of 526 million yuan in a single quarter, an increase of 33.58% over the previous year. The revenue side growth rate was slightly lower than the first half of the year, which is related to the relatively high revenue base of the same period last year; achieving net profit of 283 million yuan, an increase of 68.83% over the previous year, and the profit margin of the Q3 single quarter was 53.8%, an increase of 11 pct over the previous year. Expected mainly due to 1) the high cost and profit base of the star product Ike Xin's high growth, 3) the scale effect brought about by the high growth in revenue and the dilution of fixed costs. Judging from the growth of EcoXIN, following the price adjustments for the 50 and 60 Iqoxin tablets on January 1, price adjustments were made on July 15 for Ike's main product rules. At the same time, they also benefited from the work to expand the age group, and actively carried out all-round marketing such as channel construction, authoritative recommendations, and popular science education, which led to a sharp increase in volume and price.
Profit forecast and valuation: Based on the rationalization of corporate governance and momentum, core products successfully raised prices and expanded age groups during the year, and strong measures were taken in marketing management. Referring to the operating performance of the first three quarters, without considering possible adjustments in incentive expenses and Wolong School's announcement, we raised the company's profit forecast. Expected revenue for 2022-2024 was 23.13, 28.42, and 3.310 billion yuan respectively, up 14.1%, 22.9%, 16.5% over the previous year. Guimu's net profit was 5.73, 7.00 and 821 million yuan respectively, an increase over the previous year. 50.6%, 22.2%, 17.3%, and the closing price on October 20, 2022 corresponding to PE was 19.5, 16.0, 13.6X, and maintained the “prudent increase” rating.
Risk warning: Risks such as price reductions in product collection, falling short of expectations, negative public opinion, fluctuations in the number of births, increased competition, and fluctuations in raw material prices.