Main points of investment

The company is a leading company focusing on the use of parenteral nutrition drugs during the perioperative period, with a good product competition pattern and sustained and rapid growth brought about by the continuous expansion of pipelines. We believe that since 2021, with the introduction of 12 kinds of multivitamins for injection into health insurance, the acceleration of coverage in key hospitals and the end of the adjustment of sales channels, the overall operating efficiency of the company has been significantly improved. Under the influence of the successive launch of new products and the transfer of children's multivitamin injection (13) into the health insurance catalogue, we believe that the company's profitability and operating efficiency are still on the track of improvement in 2023-2025. We expect the company's revenue CAGR to reach 24.9% and home net profit CAGR to reach 35.0% in 2022-2025, with a "overweight" rating for the first time.

Industry: 16 billion market capacity, drug upgrading trend is obvious ① existing market space: 16 billion yuan market capacity. According to the sales situation of sample hospitals in Wind Medical Bank (Note: this data comes from Wind Medical Bank, sample sales of some hospitals, the same below), the market capacity of amino acids, vitamins and compound trace elements in 2022 is about 7.19 billion yuan, 7.03 billion yuan and 1.88 billion yuan (assuming a 3-fold magnification), and the total market volume of parenteral nutrition-related injections is about 16.1 billion yuan. ② variety structure: the proportion of "all-in-one" category has increased, and there is still room for product upgrading. For amino acid products, the proportion of sales of "all-in-one" products (that is, products with a comprehensive formulation of nutrients such as carbohydrates, amino acids, fat emulsions, vitamins, trace elements, electrolytes and water) has increased significantly since 2013 (from 27.5% in 2013 to 37.2% in 2022) to 48.4% in 2020) We believe that the industry growth is driven by the upgrading of the product structure of perioperative drug use under the unique pharmacoeconomic advantage.

Growth analysis: medical insurance increment, new variety support

We believe that 2023-2025 is the window period for core varieties to enter the health insurance volume and new varieties are approved for listing, and is gradually transitioning from single-variety dependence to multi-variety contribution growth. We expect the company's revenue CAGR to reach 24.9% in 2023-2025.

① stock variety: medical insurance increment, hospital coverage improvement. Specifically look at the core variety growth drive:

12 kinds of multivitamins for injection (listed in June 2019 and health insurance payment in March 2021): market share advantage and good competitive pattern (the sum of unmagnified sales of sample hospitals in 2022 is about 500 million yuan, of which Pude products account for 82.9%). It is expected to benefit from the increase in hospital coverage after entering health insurance.

Pediatric multivitamin injection (13) (listed in April 2018 and health insurance payment in March 2023): be optimistic about the volume potential after transferring to health insurance.

A variety of trace element injection (listed in March 2020): the competition pattern is relatively good, and it is still in the volume stage in the short and medium term.

Compound electrolyte injection (V) (available in April 2019): double buffer system, more suitable for patients with cardiac insufficiency and diabetes, looking forward to the progress of health insurance negotiations and improved hospital coverage.

② increment variety: the market share of compound amino acid is increased, and the variety of multivitamin is upgraded. Specifically look at the core varieties:

Compound amino acid injection (20AA) (available in October 2022): amino acid injection suitable for liver disease, which is expected to contribute to the increment.

Children's compound amino acid injection (19AA-Ⅰ) (listed in May 2022): the competition pattern is relatively good, and the growth is expected to come from the increase in market share.

Multivitamins for injection (13) (10tap 3) (available in August 2022): upgraded products are expected to link up with growth.

Conclusion: the competition barrier originates from compound preparation platform + differential variety iteration. From the point of view of project establishment, the company focuses on perioperative parenteral nutrition-related products. Most of the products sold are relatively good competitive pattern (reflected in relatively few enterprises) and relatively complex competitive products in a broad sense (which can constitute a change in clinical application scene by fine-tuning of content / composition). We believe that the competition barrier of this product strategy comes from ① large compound preparation process platform (compatibility and optimization of raw and auxiliary materials, etc.), ② market segment project (variety selection for differentiated indication population, etc.), ③ fine sales channel management (need to take into account market education + terminal sinking). We are optimistic about the growth elasticity of the company's old products entering health insurance and new products coming on the market one after another. from the medium-term perspective, we look forward to the layout and breakthrough of the company's new products such as parenteral nutrition and medical beauty.

Profit forecast and investment suggestion

We expect the EPS of the company to be 0.56,0.77 and 1.00 yuan per share respectively from 2023 to 2025, and the closing price on July 18, 2023 corresponds to 23 times the PE of the company in 2023, which is lower than the average of comparable companies. We believe that the company's products focus on the field of perioperative parenteral nutrition differentiation. 2023-2025 is the window period in which the core varieties have entered the medical insurance volume and new varieties have been approved, and are gradually transitioning from single-variety dependence to multi-variety contribution growth. From the industry point of view, parenteral nutrition is not an "auxiliary drug" and has unique pharmacoeconomic value in shortening hospitalization time and reducing inflammatory reaction. With the increase of peri-operative parenteral nutrition product permeability, the hospital coverage of the company's products is expected to increase at the same time. Taking into account the company's product strategy and growth phase, we are optimistic about the company's growth in 2023-2025, covering it for the first time and giving it an "overweight" rating.

Risk hint

The collection price of key products falls sharply or the risk of flow mark; the risk of product declaration or clinical progress is lower than expected; the risk of decline in the number of newborns; the risk of changes in medical regulatory policies; sample hospital data do not represent the overall risk.