Matters:
The company announced its 2022 report, achieving revenue of 2,131 million yuan (+6.57%), net profit of -76 million yuan (-123.43%), net profit of -98 million yuan (-131.81%) after deduction, and EPS of -0.22 yuan.
The company's performance fell short of previous expectations.
The company published its 2023 quarterly report, achieving revenue of 566 million yuan (+9.40%), net profit of 10 million yuan (-88.08%), and net profit of the mother of the mother of 0.7 million yuan (-89.80%) after deduction. The performance was in line with expectations.
The 2022 profit distribution plan is: $2.00 (tax included) for every 10 shares.
Ping An's point of view:
Profits in 2022 were dragged down by rising costs and loss of goodwill. Revenue in 2022 was 2,131 million yuan (+6.57%), net profit of -76 million yuan (-123.43%). Profit side performance fell short of previous expectations. On the one hand, due to the sharp rise in the price of iodine raw materials, the gross margin dropped significantly. The company's gross profit margin in 2022 was 24.04% (-13.36 pp); on the other hand, the company calculated a loss of goodwill of Poseidon Pharmaceuticals of 115 million yuan. If goodwill impairment factors are deducted, the company's net profit in 2022 is a positive value.
In 2023Q1, the company's net profit returned to the parent company of 0.1 billion yuan (-88.08%), which turned positive. According to Wind data, the average import unit price of iodine reached 71.45 US dollars/kg (+96% year on year) in February 2023, and fell to 64.77 US dollars/kg in March. We believe that once the trend of declining iodine prices is established, there is plenty of room for improvement in the company's profitability.
Rapid release on the formulation side in 2022, and API shipments declined slightly. The company's Shanghai pharmaceutical plant earned 349 million yuan (+59%) in 2022, mainly due to the release of iodohexanol and iodoxalol from the fifth batch of collected varieties, and the marketing of new varieties such as iopanol. We believe that with the successful bid for the seventh batch of iodopanol collection and the release of new products such as iomepole, the pharmaceutical sector is still expected to achieve rapid growth in 2023. In 2022, the company's revenue from the iodine contrast agent API and intermediate series was about 1.4 billion yuan. According to our estimates, the API shipment volume was about 1,200 tons, lower than the planned shipment volume at the beginning of the year. The core was still affected by the sharp increase in costs. We expect that in 2023, when there is no significant improvement on the cost side, the company's API shipments will still be affected. Once the price of iodine drops rapidly, both shipment volume and profitability are expected to increase dramatically.
The company's leading contrast agent position is still stable, and the product pipeline continues to be rich. At present, the company has listed a number of formulations such as iodoxanol, iodoxalol, iodopanol, and iomepril, and preparations such as iodofol, iopromide, gadobeturamide, and gadobutol are being actively developed and registered. According to the registration progress, iodofol, gadobetamide, etc. are expected to be approved for listing in 2023. The company plans to raise no more than 2.05 billion yuan in 2023 for the nonionic CT contrast agent series API project with an annual output of 1,550 tons and a project with an annual output of 7,710 tons of iodine-related compounds and CMO/CDMO products. The above distribution projects include expanding production of existing API products such as iodothyol, iodopanol, and ioxalol; complementing the production capacity of important products such as iodomethyl and iopromide; and further expanding the production capacity of related key intermediates and strengthening the layout advantages of vertical integration of “intermediates+APIs”.
Optimistic about the company's leading position in the contrast agent industry chain, wait for cost-side improvements to bring performance flexibility, and maintain the “recommended” rating. The company's low performance in 2022 was mainly affected by the increase in the price of upstream iodine raw materials, but the company's leading position in the industry chain did not change. Once iodine prices began to decline, the company's profit flexibility was huge. Considering that the pressure on the cost side of 23Q1 is still strong, we expect that the cost side will begin to improve significantly in the second half of 23. Therefore, the company's 2023-2024 net profit forecast was adjusted to 161 million yuan and 422 million yuan (the original forecast was 535 million yuan, 753 million yuan), adding the 2025 profit forecast. The estimated net profit for 2025 is 617 million yuan. The current stock price corresponds to PE in 2023, maintaining the “recommended” rating.
Risk warning. 1) Iodine prices are falling as fast as expected: If the pace of improvement on the cost side is slower than expected, the short-term flexibility of the company's performance is limited. 2) Market competition risk: If new entrants are concentrated, it will affect product prices. 3) Company sales fall short of expectations: If costs remain high, API and formulation shipments may fall short of expectations.