Net profit returned to the mother in '22 was +30% year on year, and 23Q1 revenue was +20% year on year. The company achieved revenue of 5.721 billion yuan in 2022, +26.98% year on year, and achieved net profit of 921 million yuan, +30.43% year on year. The year-on-year increase in revenue and profit was clearly mainly due to the steady progress of the intermediates and API business and the expansion of sales scale. On a quarterly basis, 22Q4's revenue was +24.46% year on year to 1,608 million yuan, net profit was +8.11% year on year to 200 million yuan; 23Q1 company's revenue was +19.90% year on year to 1,410 million yuan, and Guimo's net profit was -2.88% year on year to 195 million yuan.
Revenue from the pharmaceutical sector expanded steadily, and the gross margin of the mobile insurance sector bucked the trend. (1) The revenue of the pharmaceutical sector increased 22% year on year 22 to 3.6 billion yuan, accounting for 63%, and gross margin was +1.7pcts to 32.0% year on year: of which pharmaceutical raw material revenue was +28% year on year to 1,992 billion yuan, gross margin was +3.1pct to 25.5% year on year; revenue from key pharmaceutical intermediates was +14% year on year to 1,464 million yuan, gross margin was +1.2pct to 43.2% year on year; pharmaceutical revenue was +24% to 158 million yuan year on year, gross margin was +1.4pct to 9.2% year on year. The pharmaceutical sector achieved revenue of about 900 million yuan in 23Q1, +15% over the same period last year, but the 22Q1 global COVID-19 pandemic led to a sharp increase in sodium borohydride sales. The sector faced high base pressure in 23Q1, and gross margin declined year-on-year. (2) The revenue of the mobile insurance sector increased 36% year on year to 2.1 billion yuan in '22, accounting for 37%, and gross margin was -10.0 pcts to 19.5% year on year:
Among them, the revenue of douinbao pharmaceuticals was +42% yoy to 1,861 million yuan, gross margin was -9.6pct to 20.2% yoy; the revenue from douinbao additives and formulations was +3% to 229 million yuan, and gross margin was -14.0pct to 14.0% year-on-year.
The price of APIs fell to a record low in 23Q1, but thanks to cost dilution, process improvements, and energy saving and consumption reduction, the company's income from the insurance sector increased +30% year-on-year to 486 million yuan, and gross margin bucked the trend to more than 20%.
In 2023, a new production capacity of 6,000 tons of solid sodium borohydride, 2,000 tons of fluorophenicol production capacity, and 1,500 tons of doxycycline production capacity are expected. The company is currently working to promote the operation of the entire core single product chain. The new production capacity of 6,000 tons of sodium borohydride is expected to enter the commissioning stage within the year, with a total production capacity of 10,000 tons; the new production capacity of 2,000 tons of fluorophenicol is expected to enter the commissioning stage at the end of Q3 or the beginning of Q4 within the year, and the total production capacity is expected to reach 4,000 tons; doxycycline plans to increase production capacity by 1,500 tons during the year, and the total production capacity is expected to reach 2,500 tons. As the production capacity of core products doubles, the company's business scale is expected to expand steadily. At the same time, based on expectations of a recovery in the mid-term boom in the aquaculture sector, we believe that the company's animal insurance sector is expected to benefit from improved downstream demand in the future, thereby maintaining good profits.
Risk warning: Risk of another sharp rise in raw material and energy prices; risk of a sharp decline in sales of veterinary drug products for pigs due to African swine fever; risk that the large-scale downstream farming process falls short of expectations.
Investment suggestions: The company is committed to promoting the operation of the entire core single product chain of dongbao APIs. The scale of the core business is steadily expanding, compounded by positive expectations of the mid-term boom in downstream farming. We are optimistic about the future quantitative growth of the company's animal insurance sector. We expect the company's net profit to be 11.3/13.0/1.50 billion yuan in 2023-2025 (+22.4%/14.9%/15.5% over the same period last year), and EPS is 2.02/2.32/2.68 yuan respectively, maintaining the “buy” rating.