First-quarter results are excellent: the company's revenue in the first quarter of 18 years was HK $281 million, an increase of 24.6% over the same period last year, and its net profit was HK $70 million, a substantial increase of 51.3% over the same period last year. The basic profit per share was HK $11.87 cents, an increase of 51.3%, exceeding market expectations. The overall gross profit margin increased by 2.2pp to 68.3% compared with the same period last year, mainly due to the easing of the pressure of drug price reduction, the easing of the cost pressure of effective pharmaceutical ingredients (API), the improvement of sales and marketing efficiency, the rate of sales expenses was 22.2%, the rate of R & D expenditure increased by 50.5% to HK $31.49 million, and the rate of R & D expenditure increased by 1.9pp to 11.2%.
The sales of the core product portfolio showed an accelerating trend: the growth of the company's product portfolio accelerated, with imported products accounting for 53.7% of total revenue. Ramodulin, Fepril and Zhenningping walked out of the sales bottleneck, and sales increased by 120.3%, 72.2% and 65.5%, respectively. It has become the main driving force for the growth of imported products. Patented products accounted for 46.3% of total revenue, and the main patented products Ruibao, Youjingan, Suelejuan and Li Maiqing increased by 180%, 28.8%, 22.1% and 22.1% respectively. Since the sales of Ruibao special products rebounded in the past 17 years, the high growth rate is expected to be maintained. Based on the strengthening of the sales team, we expect sales of existing products to grow by about 19% for the whole of 18 years, and the trend of accelerated sales is expected to continue.
Increased investment in R & D: investment in R & D continued to increase, R & D expenditure increased by 50.5% to HK $31.49 million, and R & D expenditure rate increased by 1.9pp to 11.2% compared with the same period last year (18.7% if capitalization of R & D expenses is not taken into account). The blockbuster products under development are progressing smoothly: 1) Phase III clinical approval of oncolytic virus, and it is expected that 18Q2 will begin to recruit the first batch of Chinese patients; 2) the clinical approval of ZKAB00 (PD-L1) drug with three indications is expected to start in July; and 3) Gimatikam (a new oral lipophilic camptothecin) was approved in May 18. In addition, the company has a wide layout in the field of rare diseases, benefiting from the catalogue of rare diseases released by the country in May 18 and future policies to encourage the field of rare diseases, the company is developing products with broad prospects. On the whole, the company is researching 50 varieties, with many potential varieties and strong strength.
Raise the target price to HK $14.8 and upgrade to the "buy" rating: the company's product sales have resumed growth. We have raised the company's EPS for 18-20 years to HK $0.51,0.58 and HK $0.65 respectively, and the current stock price corresponds to HK $24 PE for 18-20 years. Considering the certainty of the company's performance growth, it is given 18-year PE for existing products, corresponding to HK $9 per share. The value per share of the products under study is about HK $5.80 discounted through rNPV, and the target price of the company is HK $14.80 combined with segment valuation method. In view of the resumption of business growth and the acceleration of the performance of the existing product portfolio, as well as the continuous clinical progress in the development of new products, the target price was raised to HK $14.8 and upgraded to the "buy" rating.
Risk hint: the progress of research and development is not as expected and sales are not as expected.
