Event: the company released its 2022 results KuaiBao, realizing revenue, net profit from home and net profit deducting non-return from home were 23.41 million yuan and 519 million yuan respectively, an increase of 15.49%, 36.46% and 44.29% respectively over the same period last year. The revenue and net profit of Dain Pharmaceutical, the core subsidiary, were 2.041 million yuan and 958 million yuan respectively, an increase of 38.58% and 44.5% over the same period last year.
Comments:
The main pharmaceutical industry grew strongly throughout the year, while non-main business and end-of-year stock control disturbed the fourth-quarter results. The company's 4Q22 revenue, net profit from home and net profit deducted from non-return are RMB 521 million, respectively, compared with the same period last year. + 14.5%, 9.7%, 18.9%, respectively. The profit end fluctuates. It is estimated that it will be dragged down by non-main industries such as environmental protection and electronic information. We expect it to recover gradually after the first quarter of 2023. The core subsidiary Dain Pharmaceutical Co., Ltd. has strong growth and outstanding performance throughout the year. The revenue and net profit of 4Q22 Dain Pharmaceutical Co., Ltd. are 436 million and 22.5%, respectively, compared with the same period last year. The revenue side continues to grow at a high speed, and the profit margin decreases significantly compared with the previous year, which is estimated to be related to channel control, increased promotion of new products and incentive planning at the end of the year.
The profitability of Dain Pharmaceutical continues to improve, and the product echelon is becoming more and more perfect. The net interest rate of Dain Pharmaceutical in 2022 reached an all-time high from + 1.9pp to 46.9%, which is estimated to be related to the increase in the share of Ikexin sales and the volume of online channels. With the aggravation of the epidemic in 2022, the company's blockbuster product Yikexin was still able to increase its volume and speed up, mainly due to the following four points: 1) the category rigid demand attribute was enhanced and the permeability increased. Vitamin AD can improve children's immunity, epidemic catalysis and professional category education to enhance consumer awareness. 2) the strong brand of OTC benefited obviously during the epidemic. Retail drugstores and online sales are growing faster. 3) expand channels and consolidate market position. 4) widen the age range to 0-6 years old and push up the ceiling. In recent years, the market of new products has been accelerated, and the echelon of products such as vitamin D, iron dextran, oral rehydration salt powder, desloratadine oral liquid and tomoxetine hydrochloride oral solution are becoming more and more perfect, which is expected to form a good pattern with more than one strength.
The main business of governance improvement is focused, and the momentum of state-owned enterprise reform is strong. In October 2022, the company's board of directors passed a resolution to withdraw from Wolong School (now 81.85%), which is expected to be formally divested in 2023. Since the new management took office in August 2021, the company has continued to focus on the main business, improve governance, divest environmental protection and school assets one after another, and implement medium-and long-term incentives within Dain Pharmaceutical to stimulate the vitality of employees.
In 2022, the company promotes the strong and high growth of Ikexin by virtue of channel expansion, professional category marketing, prolonging the age of wear, and raising prices in turn with multiple specifications, and we expect Dain Pharmaceutical to achieve rapid growth in 2023.
Profit forecast, valuation and rating: as a leading enterprise of children's medicine, Watt Dain has the advantages of brand and channel, the core large items are growing rapidly, and the governance structure continues to improve. Do not consider Wolong school divestiture for the time being, taking into account the increased volatility of non-main business operations, slightly lower the 2022-2024 home net profit forecast of 5.19 million, 677 million, 816 million (compared with the previous forecast of-9.9% Acme 3.6% Acme 1.3%), a year-on-year increase of 36.5%, 30.5%, 20.5%, the current stock price is corresponding to 21-16-13 times PE, maintaining the "Buy" rating.
Risk tips: Ikexin sales fall short of expectations; market competition intensifies; risk of failure in new drug research and development.