1H23's performance met our expectations
The company announced 1H23 results: revenue/total revenue calculated based on drug sales was 46/55 billion yuan, +3.6%/7.1% year-on-year, respectively; net profit of 1.9 billion yuan, +6.7% year-on-year. The results were in line with our expectations.
Development trends
The first half of the year was overall steady, and management maintained the 2023 positive growth guidelines. Looking at the revenue situation by product line:
Cardiovascular ratio +5.9%, digestion +4.2%, dermatology +27.4%, ophthalmology +29.6%, other products +8.8%. The company said that the situation after Deli's new collection was in line with previous predictions, retaining 65% of sales volume and 60% of revenue for the same period before collection; Boyding and Youssever entered the eighth batch of collection, and implementation began in July. The price impact was about 20%. The company expected to maintain 50-60% of sales for the same period before collection; Xiliaotuo was dragged down by upstream supply, and revenue growth in the first half of the year was negative year-on-year. The company said it could achieve stable domestic supply in about two years; Ansuxi's revenue grew slightly slowly. Inventory levels Tweak. Management's guidelines for maintaining positive performance growth in 2023 are also expected to continue to grow positively in 2024, and the overall level of the company will return to double-digit revenue growth in 2025.
Innovation, medical aesthetics, and overseas travel continue to advance. Prefilled methotrexate injections, tiracizumab, and diazepam nasal spray were approved for marketing on 1H23. The company said that methotrexate is a drug in short supply and can be connected to the Internet in an emergency, while tirizepam and diazepam will participate in national health insurance negotiations at the end of this year. The company expects the three new products to contribute 3-5 billion yuan in revenue in 2024 and double growth in 2025. In August, the first prescription for rukotinib in China was issued at Hainan Boao Super Hospital. The company expects to be officially approved for listing in China in 2025. In August, the company reached a cooperation with Nanjing Ningdan New Pharmaceutical and obtained permanent exclusive promotion rights for Class 1 drug Y-3 injection in mainland China, Hong Kong and Macao. According to the company, this product simultaneously interferes with dual targets and is expected to become the first novel brain cell protector that combines treatment of stroke and post-stroke depression. Currently, it is in phase 3 clinical phase in China, and the company expects to be approved for marketing in 2026-27. Furthermore, as of 1H23, the company has about 30 innovative pipelines and more than 10 RCT clinical trials in progress. In terms of internationalization, Kanglianda, the company's Southeast Asian business entity, set up a joint venture with Junshi Biotech in March to obtain exclusive development and commercialization rights for PD-1 triprimab in 9 Southeast Asian countries. In addition, the company also incorporated Southeast Asian market rights such as diazepam nasal spray and methylene blue enterolytic extended-release tablets into Kanglianda.
We expect the commercialization of the Southeast Asian market to enhance the company's performance.
Profit forecasting and valuation
We have kept our profit forecast unchanged, and the current stock price corresponds to a price-earnings ratio of 7.5/6.8 times 2023/24. We maintain our outperforming industry rating and target price of HK$18 unchanged, corresponding to a price-earnings ratio of 11.0/10.1 times 2023/24, which is 56% upward from the current stock price.
risks
The impact of collection on prices exceeded expectations, commercialization of new products fell short of expectations, overseas trips fell short of expectations, the competitive landscape worsened, and research and development failed.