Incident: Eling Pharmaceutical released its semi-annual report for 2023. During the reporting period, it achieved revenue of 6.791 billion yuan (+21.99% YoY), net profit of 1,606 billion yuan (YoY +53.16%), net profit of 1,541 billion yuan (YoY +46.67%); of these, 23Q2 achieved revenue of 2,856 billion yuan (+0.40% YoY), net profit of 404 million yuan (-28.49%), net profit of 363 million yuan (YoY).
Revenue in Q2 was basically the same, mainly because Lianhua Qingfeng had a large base in the same period last year, and the company actively controlled goods to digest Lianhua Qingfeng's inventory in channels and households caused by the 22Q4 and 23Q1 epidemics+influenza. By product, cardiovascular/respiratory systems/other patented products/other 23H1 categories achieved revenue of 25.11/30.88/277/915 million yuan, respectively, compared to +10.44%/+20.95%/+47.26%/+65.90%.
Q2 Profit was under obvious pressure, mainly due to a large year-on-year decline in gross margin and low sales expenses in the same period last year.
The Q2 operating margin was 16.86% (year-on-year -8.39pct), of which gross margin was 57.29% (year-on-year -6.13pct), mainly due to the price increase of Chinese herbal medicines, which led to a decline in the gross margin of cardiovascular products and a decline in the share of Lianhua Qingfeng, which has a higher gross margin; the sales expense ratio was 27.77% (+2.04pct), mainly due to the low cost investment of the company after the outbreak of the 22Q2 epidemic. 23Q2 showed a recovery trend.
Research and development of traditional Chinese medicine is progressing smoothly. Qi****mu capsules to treat diabetic retinopathy have been declared as a new drug; Chaihuangli Cholichan Capsules/Yuping Tongjiao tablets to treat chronic cholecystitis/allergic rhinitis completed phase III clinical trials; paralysis tablets for rheumatoid arthritis/pediatric colds and pediatric lianhua qingshan granules are undergoing clinical phase III clinical trials; Asichixia cold granules/shen rong granules for gastrointestinal cold/amyotrophic lateral sclerosis have been approved for clinical use; Chai Qintongli tablets for treating chronic cholecystitis/allergic rhinitis Approved to conduct clinical trials to add “recurrent urinary tract infections”/“cancer-induced fatigue” indications; Yujetai capsules completed Phase IV clinical and registration changes.
Maintain a “buy” rating. Net profit for 2023-2025 is estimated to be 24.87/28.18/32.32 billion yuan, up 5.3%/13.3%/14.7% year on year. EPS is 1.49/1.69/1.93 yuan respectively, and corresponding PE is 15.5/13.6/11.9x, respectively. Maintaining the “buy” rating, considering the company's unique model of patented new drug development and academic marketing promotion under the guidance of the company's unique neuropathology theory.
Risk warning: policy adjustment risk, R&D innovation risk, cost increase risk