The company forecasts an increase of 40% in profit over the same period last year. 45%.
The company issued a positive profit forecast: the company expects 2022 net profit to increase by 40% to 45% compared with HK $786 million in 2021, which is in line with our expectations.
Pay attention to the main points
The growth in 2022 mainly comes from the API sector. The company announced that the expected growth is mainly due to a sharp increase of more than 150% in sales of APIs in 2022 compared with 2021. Revenue from the company's API sector rose 198.8 per cent to HK $1.085 billion in the first three quarters of 2022, mainly due to a 277.8 per cent year-on-year increase in caffeine sales. In the first three quarters of 2022, the company's gross profit margin was 56.3%, down 3.5 percentage points from the same period last year, mainly due to an increase in the proportion of raw materials, while its gross profit margin was lower than that of preparations.
Since 2023, the development of generic drug products has been progressing smoothly. 1) on January 5, the company announced that it had obtained registration approval for felodipine sustained-release tablets (5mg) and racoxamide injection (20ml:0.2g), which was deemed to have passed the consistency evaluation; 2) on January 19, the company announced that its doxophylline had been approved as an API for listed preparations; and 3) on January 30, the company announced that its terbutaline sulfate injection had been approved as the third in China, which was regarded as passing the consistency evaluation. 4) on February 2, the company announced that the registration approval of ornidazole injection (3ml:0.5g) and lipoic acid injection (24ml:600mg) was deemed to have passed the consistency evaluation; 5) on February 6, the company announced that its tinidazole had been approved as the raw material drug for use in the market preparation, and the registration approval of ornidazole injection (6ml:1.0g) was deemed to have passed the consistency evaluation. 6) on February 20, the company announced that it had obtained the registration approval of luraceone hydrochloride tablets (40mg), which was regarded as passing the consistency evaluation.
As of February 2023, a total of 96 products have been listed in the national essential drug catalogue. According to the company announcement, National Healthcare Security Administration officially implemented the National basic Medical Insurance, Industrial injury Insurance and Maternity Insurance Drug catalogue (2022) from March 1, 2023, in which the company's racoxamide injection (20ml:0.2g) was included in the national base drug catalogue regularly negotiated by the Association for the combined treatment of partial seizures in patients with epilepsy. In addition, Bunan Serin tablets were transferred into conventional western medicine for the treatment of schizophrenia.
Profit forecast and valuation
We keep our revenue forecasts unchanged for 2022 and 2023, but taking into account the impact of the increase in the share of the API sector, we reduce the company's net profit forecasts for 2022 and 2023 by 3.5 to 1.124 billion Hong Kong dollars (+ 43.1%YoY) and 3.3 to 1.351 billion Hong Kong dollars (+ 20.2%YoY), respectively.
We first introduced the 2024 net profit forecast of HK $1.609 billion (+ 19.1%YoY). The current share price corresponds to a price-to-earnings ratio of 10.3 times earnings for 2023 Universe in 2024. Taking into account the improvement in the valuation hub of the Hong Kong pharmaceutical sector, we maintain an outperform industry rating and a target price of HK $5.30, corresponding to 11.6 times 2023 price-to-earnings ratio and 9.8 times 2024 price-to-earnings ratio, which is 13.0% higher than the current share price.
Risk
The sales volume of the new product is not as expected, and the result of winning the bid is not as expected.