occurrences

Wei Xinkang recently released its report for the first half of 2023: In the first half of 2023, the company achieved revenue of 750 million yuan (+12.2%), net profit of 130 million yuan (+30.1%), net profit of non-return income of 130 million yuan (+2.3%); on a quarterly basis, 2023Q2 achieved revenue of 400 million yuan (+13.1%), net profit of 0.7 million yuan (+15.1%), net profit of 0.7 million yuan (+15.1%) after deducting non-return net profit of 0.7 billion yuan (+14.5%).

The sales management expense ratio continues to improve, and R&D investment continues to increase. From the perspective of profitability, the company's gross profit margin for the first half of 2023 was 50.9%, down 0.5 pct from the same period last year, minus the non-homologated net interest rate of 17.5%, up 2.3 pct from the same period last year; the gross profit margin for the 2023Q2 quarter was 51.2%, basically maintaining the same period last year, with a slight increase over last year. From the cost side, the sales and management expenses rate for the first half of 2023 decreased by 4.6 pct compared to last year; the R&D expense rate was 5.6%, R&D expenses increased 72.2% year on year, and R&D investment continued to increase.

Channel coverage continues to increase. The three core products continue to be strengthened to win tenders/online by product. In the first half of 2023, injectable multivitamin (12) was the first domestic imitation, domestic exclusive variety, national health insurance catalogue (category B) variety, and national essential drug catalogue variety. It has won bidding/listing in 30 provincial administrative regions, and has maintained a market share of more than 80% in the similar product market over the years; various trace element injections are the first domestic imitation, domestic exclusive variety, national health insurance catalogue (category B) variety, and completed 28 provincial administrative regions Tag/hook up, 2023 In the first half of the year, the product achieved sales revenue of 86.93 million yuan, an increase of 3.7% over the previous year; pediatric multivitamin injection (13) was the first domestic imitation and exclusive domestic variety. In January 2023, through national health insurance negotiations organized by the National Health Insurance Administration, it was included in the “National Basic Medical Insurance, Work Injury Insurance, and Maternity Insurance Drug Catalogue (2022)”, and completed the bidding/listing in 31 provincial administrative regions. In the first half of 2023, the product achieved sales revenue of 22.236 million yuan, an increase of 8.6% over the previous year.

The matrix of parenteral nutrition products continues to be enriched, and channels are being expanded rapidly

Pediatric compound amino acid injection (19AA-I) and compound amino acid injection (20AA) are national health insurance catalogue (category B) varieties. Both are the first companies to pass the consistency evaluation. 19AA-I and 20AA have won the bidding/listing in 30 and 26 provincial administrative regions, respectively; injectable multivitamins suitable for preventing vitamin deficiencies in adults receiving parenteral nutrition and children aged 11 and above (13) (10/3) have completed the bidding/listing in 16 provincial administrative regions; compound electrolyte injection (V) is the first in China Imitation variety, already The bidding/listing for 25 provincial administrative regions has been completed; compound electrolyte injection (II) has been bidding/listed in 19 provincial administrative regions; acetylcysteine solution for inhalation is a type in the National Health Insurance Catalogue (Class B), and has been bidding/listed in 27 provincial administrative regions. Dopamine hydrochloride injections have obtained drug registration certificates, and it is expected that 1-2 products will be approved in the second half of 2023.

Investment advice and profit forecasting

The medical administration for pediatric multivitamin injections (13) is maintained, and many new products are continuously approved. The company's revenue for 2023-2025 is expected to be 16.3/20.0/2.45 billion, with a growth rate of 16.4%/22.7%/22.9%; the net profit of returning mother was 2.5/3.3/4.1 billion, with a growth rate of 43.9%/27.8%/26.5%; EPS is 0.6/0.8/1.0 yuan/share, corresponding PE is 17.5/13.87/10.8. Maintain a “buy” rating.

Risk warning

Risk of uncertainty in R&D; risk of price reduction of core health insurance products; risk of increased industry competition; risk of uncertainty in channel expansion, etc.