Incident: The company released its semi-annual report for 2023. 2023H1 achieved operating income of 4.3 billion yuan (-19.4%), net profit of 960 million yuan (-24.2%), net profit of not attributable to parent of 9.1 billion yuan (-28.4%) after deducting net profit of 91 billion yuan (-28.4%).
The high COVID-19 base affects the apparent growth rate. On a quarterly basis, the company's revenue for the 2023Q1/Q2 single quarter was 2,44/1.86 billion yuan (-4.4%/-33.1%), respectively, and realized net profit of 6/37 billion yuan (+9.5%/-49.6%), respectively. The decline in performance in the Q2 single quarter was mainly due to the high COVID-19 product base in the same period last year.
In terms of profitability, the company's H1 gross margin in 2023 was 64.9% (+2.8pp), the sales expenses ratio was 18.7% (+3.3pp), and the management expenses ratio was 8.8% (+2pp), which remained stable. The net interest rate was 23.2% (-1.1 pp).
Innovative device products are growing steadily, and new business continues to expand. By business, the device sector has revenue of 2.02 billion yuan (-32.6%), revenue from its central vascular implant intervention product portfolio increased 13.3% year on year, and surgical anesthesia business increased 21.2% year on year. The company has obtained 594 Class II and III medical device registration certificates approved by the Chinese NMPA, 239 EU CE certifications, and 33 US FDA certifications. The pharmaceutical sector has revenue of 1.6 billion yuan (-8.5%), of which pharmaceutical (generic drugs) revenue is 1.4 billion yuan and API revenue is 190 million yuan. Among them, the company's sigliptin tablets, englizine tablets, doxazosin mesylate extended-release tablets, and rosulvastatin calcium tablets have been approved for listing. The medical services and health management sector has revenue of 690 million yuan (+15.2%). Based on the Lepuyun platform, the company focuses on the three major services of medical-grade heart monitoring, home health monitoring, and smart rehabilitation and nursing. It provides various vital sign monitoring products and services to hospitals and individual consumers at all levels. Its central electronic testing products rely on the artificial intelligence AI-ECG Platform and can provide long-range dynamic ECG monitoring services remotely. At the same time, the company is developing a strategic layout in consumer healthcare. Products have already been launched in dermatology, ophthalmology, and dentistry, which are expected to contribute new growth points.
The pipeline of innovative products is rich, and equity incentives show confidence. In 2023, H1 invested 600 million yuan in R&D, accounting for 14% of revenue, mainly to accelerate the development of innovative products. Currently, the company's innovative product matrix is becoming more and more complete. It is expected to launch 26 blockbuster products in the next four years. With the implementation of innovative products, the company is more capable of resisting collection risks. Combined with the company's strategic direction of “innovation, service, nationalization, integration, efficiency and steady development”, the company is expected to become a leader in the entire cardiovascular industry chain.
Profit forecast and investment suggestions: The company's net profit from 2023 to 2025 is estimated to be 25.1, 29.9 billion yuan, and 3.42 billion yuan. EPS is 1.34, 1.59, and 1.82 yuan respectively, and corresponding PE is 14, 11, and 10 times, respectively. The company's share of innovative devices continues to increase, the effects of strategic transformation are gradually showing, and the “buy” rating is maintained.
Risk warning: Risk of exchange rate fluctuations, risk of policy fee control, volume of innovative products or falling short of expectations, repeated impact of the epidemic.