Incident: On April 28, 2023, the company released the first quarterly report of 2023. 2023Q1 achieved operating income of 10.871 billion yuan, an increase of 4.68% over the previous year; Guimu's net profit was 997 million yuan, an increase of 116.17% over the previous year; after deducting non-net profit of 919 million yuan, an increase of 14.78% over the previous year.
New products entered the release period, and endogenous growth continued. The increase in net income continued in 23Q1, mainly due to the low base of 338 million yuan invested in BioNTech shares in 22Q1. Revenue grew steadily, with steady revenue growth and steady withholding, thanks to the reduction in low-margin anti-epidemic varieties and the active return of high-margin varieties to the hospital. Overall gross margin increased significantly, with net profit growing faster than revenue growth. New products such as Hans (slurizumab), Hantriazumab (injectable trastuzumab), and sukoxin (abatripopa maleate tablets) continue to be released, contributing considerable cash flow, and the company's endogenous growth can be expected to continue.
The rate rate for the period gradually moved closer to the level before the liquid situation. The 23Q1 gross profit margin was 51.29% (+7.75pp), the number of low-margin anti-epidemic varieties decreased and high-margin varieties actively resumed admission. The overall gross margin increased significantly. 23Q1 sales expenses amounted to 2,515 million yuan (+21.70%), sales rate 23.14% (+3.23pp), management expenses of 9.12% (+1.55pp), and management expenses remained stable, R&D expenses of 999 million yuan (+1.55pp), R&D expenses (+2.031%) 8.91% (+1.16pp), several R&D projects are progressing smoothly. Financial expenses were 261 million yuan (+144.62%), and the financial rate was 2.40% (+1.37pp).
The variety being developed has entered the harvest period, and the results of innovation and transformation have been remarkable. Since 2020, the company's share of new products has continued to increase, R&D projects have progressed smoothly, and have gradually entered the harvest period. Recently, key research varieties have progressed smoothly: (1) FS-1502 (HER2-ADC) is used to treat HER2-positive, iroperably resected localized or metastatic mastitis, initiating the Sichuan phase in China. (2) FCN-159 (MEK small molecule) is used to treat tissue microsporia pain, and HLX208 (BRAFV600E inhibitor) is used to treat adults with BRAF V60OE mutation histiocytic hyperplasia (LCH) and Erdheim-Chester disease (ECD), which was incorporated into the breakthrough therapeutic drug program by the National Drug Administration.
(3) The 13-valent pulmonary conjugate vaccine completed clinical enrollment in Kengneichuan, China. (4) RT002 (long-acting botulinum toxin) for temporary improvement of moderate to severe frown mosquitoes caused by activity of frown muscles or interstitial brow muscles in adults should be accepted for marketing in China
Profit forecasts and investment suggestions: We expect operating revenue to be 513 and 60271.5 billion yuan respectively in 2023-2025, up 16.64%, 17.45% and 18.67% year-on-year; Guimu Jingli Dong will be 49, 58 and 6.8 billion yuan respectively, up 30.29%, 19.17% and 17.89% year-on-year. The company is one of the leading innovative drug companies in China. Innovative drugs have entered a concentrated harvest period, structural improvements in the main business have returned to growth, and maintained a “buy” rating
Risk warning: Outbound mergers and acquisitions fall short of expectations; risk of new drug development failure; risk of declining volume procurement of chemical generic drugs and exceeding expectations.