Incidents:
The company achieved operating income of 887 million yuan in 2022, +16.94% year on year; net profit of the mother was 178 million yuan, +40.41% year on year; net profit of the non-return mother was 171 million yuan, +51.54% year on year.
2023Q1 achieved operating income of 304 million yuan, +56.50% year on year; net profit of 105 million yuan, +130.96% year on year; net profit of non-return mother was 105 million yuan, +131.15% year on year.
Analytical reviews
22Q4/23Q1 performance increased sharply. Financial data for the first quarter gradually resumed improving. Looking at a single quarter, the company's 202Q4 revenue was 304 million yuan, +30.44% year on year; net profit of the mother was 80 million yuan, +234.47% year on year; net profit after deducting non-return to the mother was 80 million yuan, +239.77% year on year. 2023Q1 achieved operating income of 304 million yuan, +56.50% year on year; net profit of 105 million yuan, +130.96% year on year; net profit of non-return mother was 105 million yuan, +131.15% year on year. Sales of related drugs, mainly core products such as cough tablets, have recovered relatively well.
The company's overall gross margin for the first quarter of 2023 was 62.83%, +10.50 percentage points year on year; the cost rate for the period was 21.25%, -2.00 percentage points year on year; of these, the sales expense ratio was 11.68%, +3.18 percentage points year on year, mainly due to the recovery increase in advertising expenses and business promotion expenses; management expenses ratio 8.73%, -2.70 percentage points year on year; net operating cash flow was 0.27 billion yuan, +1.02% year on year.
The traditional Chinese medicine sector of Cough Relief Bao is growing, and the integrated advantage of “API plus formulation” is gradually showing that by industry, some of the revenue of proprietary Chinese medicines was 404 million yuan, a year-on-year growth rate of +24.59%; gross margin was 64.57%, -8.14 percentage points over the previous year. The resumption of sales of related drugs, such as the company's core product, cough tablets, has brought growth momentum.
The revenue share of chemical pharmaceuticals was 409 million yuan, a year-on-year growth rate of +15.32%; gross margin was 30.50%, +0.96 percentage points year-on-year. Revenue from chemical raw materials was 68 million yuan, a year-on-year growth rate of -7.44%; gross margin was 68.88%, -10.77 percentage points year on year. The advantages of “API drug+formulation” integration are gradually being realized.
Awareness of cough tablets can be expected to increase. The product lineup is rich and can be expected to increase in the future, up to the company's main varieties of cough tablets. As the company's exclusive product, Teyi Pharmaceutical's cough tablets were famous in the late Qing Dynasty, and had a high level of recognition and a loyal user base. The company's cough tablets have ranked among the top five brands of oral cough medicines for many years in a row.
The company's numerous approvals are simultaneously working in the three major directions of proprietary Chinese medicines, chemical drugs, and chemical raw materials. The company has a rich range of pharmaceuticals, covering various types and multi-dosage products such as proprietary Chinese medicines, chemical preparations, and chemical raw materials. It is rich in respiratory, skin, cardiovascular, cerebrovascular, digestive, and hypoglycemic drugs. The company has cultivated blood poison pills for skin diseases and hypoglycemic pills as major varieties after cough tablets, adding new momentum to the increase in sales scale.
In addition, the company combined new drug research, clinical research and real-world research to lay out a number of strategic reserve varieties to promote the growth of specialty traditional Chinese medicine varieties such as Liuhe tea granules (registered as modified new drugs) and active parasitic granules into major varieties of traditional Chinese medicine, increasing the foundation for sales development.
Investment advice
We expect the company's revenue from 2023 to 2025 was 11.4/14.5/1.83 billion yuan respectively, up 28.7%/27.0%/26.0%, respectively, and the net profit of the mother was 2.5/34.4/44 billion yuan respectively, up 39.5%/34.8%/31.8% year-on-year, respectively. The corresponding valuation is 20X/15X/11X. Maintain a “buy” investment rating.
Risk warning
Risk of policy change; risk of drug price reduction; business risk.