Incidents:
The company released its 2022 annual report and the first quarter report of 2023: in 2022, the company achieved revenue of 2,778 million yuan (yoy -14.98%); achieved net profit of 1,582 million yuan (yoy +20.92%), after deducting net profit of 841 million yuan (yoy -23.90%); achieved net operating cash flow of 863 million yuan (yoy -26.88%).
Q1 2023 achieved revenue of 665 million yuan (yoy -25.03%); realized net profit of 250 million yuan (yoy -69.87%), net profit of non-return mother was 247 million yuan (YOY -36.48%); and achieved net operating cash flow of 156 million yuan (yoy -55.78%).
Comment:
1. Performance was pressured by the reduction in insulin collection prices in 2022. Cost control and cost reduction were very effective. It is expected that volume in exchange for price will achieve rapid growth in the future.
In 2022, the company achieved revenue of 2,778 million yuan (YOY -14.98%), net profit of 1,582 million yuan (YOY +20.92%), and net profit of 841 million yuan (YOY -23.90%) after deducting net profit of non-return to the mother. 2022 is the year insulin collection was implemented. Affected by the reduction in collection prices, the company's revenue from all series of insulin products declined to varying degrees, leading to a corresponding decrease in revenue. The company controls costs and reduces costs through measures such as optimizing supply chain management and improving production processes. In 2022, sales of the company's full range of insulin products increased 14.92% year-on-year; the market share of human insulin increased to 40.50%, ranking first in the country; in 2022, the company's glycine insulin market share continued to rise rapidly to about 5.90%.
2. Deeply involved in diabetes treatment, focusing on endocrine metabolism, continuing to expand the field of disease treatment, and the product system continues to be enriched.
The company focuses on developing the field of diabetes treatment and continues to enrich its product line. Currently, the treatment field has been expanded from diabetes to gout/hyperuricemia treatment, covering indications such as diabetes, obesity, non-alcoholic steatohepatitis (NASH), and gout/hyperuricemia. The company's Mendon 30 and 50 premixed insulin and the oral hypoglycemic drug repaglinide have been marketed one after another, and GLP-1RA liraglutide injection and the oral hypoglycemic drug engliflozin are expected to be approved for marketing within 2023. The company's research projects include 3 new class I drugs in the field of diabetes treatment, 2 new drugs in the field of gout/hyperuricemia treatment, and chemical oral drugs in the field of gout treatment.
3. “Independent research and development+foreign cooperation+international market expansion” drives the company's long-term development.
The company exchanged industry-university-research activities and jointly developed new projects with universities and research institutes, established cooperative bases with Central South University, established “workstations”, “innovation and entrepreneurship platforms”, and “science and technology innovation centers” high-end technology innovation R&D platforms to advance the R&D process. The company continues to expand the international market. All phase III clinical trials of human insulin registered in the European Union have been completed, and the marketing license application for human insulin injections has been officially accepted by the European Medicines Agency; glycine insulin has carried out registration capital preparation and application work in many developing countries, while also completing preliminary preparations for Mendon's insulin registration applications in developing countries. The company is actively seeking overseas partners and has now established business contacts of varying degrees with enterprises in Eastern Europe, Southeast Asia, West Asia, Central Asia, the Middle East, Africa, South America and Central America.
Profit forecast: We expect the company to achieve net profit of 1,132 billion yuan, 1,332 billion yuan, and 1,561 billion yuan in 2022-2024, up -28.42%, 17.64%, and 17.2%, respectively. The corresponding PE valuations are 20, 17, and 15 respectively, covered for the first time, and given a “highly recommended” rating.
Risk warning: New product development progress falls short of expected risks; market expansion and sales fall short of expectations; risk of product collection and price reduction exceeding expectations.