Profit for the first half of 2023 was in line with our expectations
The company announced its results for the first half of 2023: the company's revenue for the first half of the year was 8.72 billion yuan, up 1.81% year on year; net profit for the first half of the year was 8.2 billion yuan (corresponding to profit of 0.43 yuan per share), up 1.77% year on year, after deducting non-return net profit of 780 million yuan, down 2.77% year on year. 1H23 profit was in line with our expectations.
Development trends
Health Yuan's own business profit continued to grow in the first half of the year. 1H23 Health Yuan itself (excluding Lizhu Group and Rezumab) had operating income of 2.194 billion yuan, down about 7.48% year on year; net profit attributable to mother was 445 million yuan, up about 5.70% year on year; net profit after deducting non-homogenized net profit was 435 million yuan, up about 5.01% year on year. In the first half of the year, although sales revenue in the anti-infective sector fell 79.17% year on year to 120 million yuan due to the impact of collection, revenue from the respiratory sector was 809 million yuan, an increase of 44.08% year on year.
Accelerate the layout of key products for inhalation formulations, and future pipeline products can be expected. As of August 23, 2023, the company announced: 1H23 has developed 559 hospitals above level II, and respiratory types have covered more than 3,800 hospitals above level II. The company is speeding up hospital development of key varieties such as tobramycin inhalation solution and levosalbutamol hydrochloride nebulized inhalation solution. In terms of new products, 1) the formoterol fumarate inhalation solution was approved for sale in July this year, 2) the salmeteroticasone inhalation powder has been declared for production (this is the first generic drug in China to submit a registration application for this product since the publication of the BE guidelines for the new inhalation formulation in 2020), 3) indacaterol maleate inhalation powder and fluticasone propionate aerosol suspension are in the marketing license review stage.
Phased progress has been made in BD, and a number of innovative drugs have been introduced. As of August 23, 2023, the company announced: 1) TG-1000 (an innovative PA endonuclease inhibitor that can effectively inhibit influenza A and B viruses at the same time) will soon be undergoing phase III clinical studies, and 2) XYP-001 (an improved innovative drug for treating idiopathic pulmonary fibrosis) is undergoing phase I clinical trials.
Its own health products and OTC sector continued to grow, while the API sector declined slightly. According to the company's semi-annual report:
In 1H23, Health Yuan's own health products and OTC segment achieved revenue of 202 million yuan, an increase of about 33.17% over the previous year. The company's digital marketing system, which is driven by user operations as the core data, has basically been completed, and sales performance is growing steadily. The sales revenue of the company's own APIs and intermediates segment was 1,060 million yuan, a year-on-year decrease of 7.82%.
Profit forecasting and valuation
Considering the impact of collection and API demand and price declines, we lowered the EPS forecast for 2023/2024 after the company's share repurchase by 8.1%/10.0% to 0.83 yuan/0.95 yuan. The current stock price corresponds to the price-earnings ratio of 13.7 times/12.1 times of 2023/2024. We maintained our outperforming industry rating, and simultaneously lowered our target price by 8.0% to 14.72 yuan, corresponding to a price-earnings ratio of 17.7 times/15.6 times in 2023/2024, with 29.0% upside from the current stock price.
risks
Sales of inhalation products fell short of expectations; product development progress fell short of expectations.