Key points of investment
Cyclopofol continues to grow rapidly. In 2022, the company's revenue was 3.02 billion yuan, an increase of 8.7% over the same period, net profit of 280 million yuan, an increase of -19.7%, after deduction of 960 million yuan of net profit of non-return to the mother, an increase of 171.4%. On the revenue side, anesthetic products amounted to 440 million yuan, an increase of 626.8%. Of this, cyclopropenol sold 435 million yuan, admitted 1,300 hospitals, and reached the 2023 target of more than 10 million. Other sectors, revenue from APIs and patented technology was 750 million yuan, an increase of 7.2%; parenteral nutrition sales were 640 million yuan, an increase of -24.7%; and other indications were 3.7 billion yuan, an increase of 25.4%. On the cost side, the sales expenses rate was 37.7% (same increase of 2.5 pct), the management expenses rate was 10.9% (same increase - 1.8 pct), and the R&D expenses rate was 14.9% (same increase - 0.8 pct). After deducting non-net interest rate of 3.2% (same increase of 1.9 pct), the increase was significant.
Research and development projects are progressing rapidly, and many products have entered the late clinical stage. Cyclopofol phase III clinical trials continue to advance in the US; HSK16149 diabetic peripheral neuralgia has submitted an NDA application; HSK76532 diabetes has submitted an NDA application; HSK21542 post-operative analgesia/itching is undergoing phase III clinical trials and is about to be reported by NDA; HSK31679 (primary hypercholesterolemia) is about to enter phase II clinical trials; HSK29116 (B-cell lymphoma) is undergoing phase I clinical trials; HSK40118 (NSCLC), HSK38008 (prostate cancer) is expected to enter phase I clinical treatment one after another in 2023; HSK31858 (non-cystic bronchiectasis) is actively promoting phase II clinical treatment. HL231 (COPD) is undergoing a phase II clinical study. In 2024-25, it is expected that 4 innovative drugs will be collected, with an overall sales peak of 5.5 to 7.5 billion yuan.
Looking ahead to innovation, internationalization+BD is expected to achieve a breakthrough. The first phase III clinical trial induced by HSK3486 anesthesia has reached the end point. The second phase III clinical trial is progressing smoothly. The third phase III clinical trial is planned to be carried out in the US and Europe in 2023. Overseas clinical trials of HSK3486 and HSK29116 will be promoted in 2023 to seek a breakthrough in foreign cooperation/licensing of innovative drugs. The riluzole oral membrane EXSERVANTM (fever) introduced by the company will be responsible for the registration and commercialization of EXSERVANTM in China. Currently, it is actively preparing listing applications, which is expected to contribute to new growth points.
Profit forecast and investment rating: The company invests heavily in R&D, and there is uncertainty about the confirmation period of external licensing and government subsidy earnings. We lowered the net profit of the mother in 2023-2024 from 40/61 million yuan to 31/40 million yuan. The estimated net profit of the mother in 2025 is 60 million yuan. The current market value corresponds to PE in 2023-2025 by 102/76/51 times, respectively. As the company: 1) Cyclopofol has great commercial potential and continues to be implemented; 2) the scale effect of new drugs is gradually reflected and profitability is increasing; 3) the external licensing of innovative drugs is expected to increase profits; 4) innovative products meet the demand period, medium- to long-term performance is accelerated, and the “buy” rating is maintained.
Risk warning: innovative drug sales fall short of expectations, risk of drug price reduction, risk of volume procurement