Incidents:
The company released the 2023 semi-annual report, 2023H1. The company achieved operating income of 4.301 billion yuan (YoY -19.35%), net profit of 961 million yuan (YoY -24.17%), net profit of 905 million yuan (YoY -28.38%) after deducting non-attributable net profit of 905 million yuan (YoY -28.38%). In 2023Q2, the company achieved operating income of 1,864 million yuan (YoY -33.05%), net profit of 365 million yuan (YoY -49.55%), net profit of non-attributable income of 342 million yuan (YoY -52.19%).
Comment:
1. The conventional device business is growing steadily, and the pharmaceutical sector is under pressure in the short term. 2023H1's medical device business achieved revenue of 2,016 billion yuan, mainly affected by the high emergency business base in the same period last year, with an overall year-on-year decline of 32.58%; the conventional device business still maintained steady growth. Its central vascular implant intervention innovation product portfolio revenue increased 13.27% year on year, and surgical anesthesia business revenue increased 21.16% year on year. The 2023H1 pharmaceutical sector achieved revenue of 1,599 billion yuan, mainly affected by the abandonment of the bid for clopidogrel in secondary collection and inventory digestion calculation in Jiangsu. The year-on-year decline was 8.5%, of which revenue from the formulation business was 1,404 billion yuan and API revenue was 195 million yuan. Subsequently, the pharmaceutical sector is expected to resume growth, driven by newly approved products such as sigliptin tablets, englizine tablets, dosazosin mesylate sustained-release tablets, rosulvastatin calcium tablets generic drugs, and soon-to-be approved glycine insulin APIs and injections.
2. The medical service business is growing steadily, and the expansion of consumer healthcare is accelerating. The company strategically lays out the medical services and health management sector. 2023H1 achieved revenue of 686 million yuan (YoY +15.23%). Hefei Cardiovascular Hospital performed well, an increase of 70% over the previous year. In addition, the company has obtained certification for two OK mirror products in ophthalmology, 5 products including soft hydrophilic contact lenses, 5 dermatology products have entered clinical use, and NeoGlu, the first multi-parameter non-invasive blood glucose meter in China, has been submitted for registration. AICGM (implantable) has completed clinical trials and is expected to be Q4 declared, and reserves of diversified consumer medical products are becoming more and more abundant. In terms of channels, the company has formed an OTC team of more than 1,200 people and has included health management devices in the assessment. It is expected to collaborate with channel advantages and accelerate the expansion of consumer medical services.
3. The research pipeline is rich, and innovative products provide long-term impetus for the company's development. The company insists on innovation and lays out serialized products under development in various fields. It is expected that commercial sales will continue to be achieved in 3-5 years, driving the company's performance growth: 1) The cardiovascular device segment, the addition of a disposable radial artery compressor (WRISband), a disposable guide sheath, and the software for calculating blood flow reserve scores for coronary angiography images, was approved; 2) The pharmaceutical sector, the three-target GLP-1 product was approved for the first time in China); 3) In the consumer healthcare sector, the company continues to expand research and development of new ophthalmology, dentistry and dermatology products.
Profit forecast: We expect the company's revenue for 2023-2025 to be 106.72, 123.92, and 14.201 billion yuan respectively, with year-on-year growth rates of 0.59%, 16.12%, and 14.60%, and net profit of 2,042, 25.73, and 3.129 billion yuan, respectively. The year-on-year growth rates are -7.30%, 25.98%, and 21.63%, corresponding to the current stock price PE, 15, 12, and 10 times, respectively, giving a “recommended” rating.
Risk warning: the risk of price cuts in the collection of high-value medical consumables, the risk of new drug collection and the failure to win bids for collected products, new product development and registration progress falling short of expectations, risk of industry policy changes, increased risk of market competition, business integration falling short of expectations, and expansion of new fields falling short of expectations, etc.