Event: On August 29, 2023, the company released its 2023 semi-annual report. In the first half of 2023, total operating income was 21.395 billion yuan, up 0.26% year on year; net profit of 1,778 billion yuan, up 14.87% year on year; net profit after deducting non-return net profit of 1,373 billion yuan, down 26.28% year on year.
On a quarterly basis, 2023Q2 achieved revenue of 10.524 billion yuan (-3.96%), net profit attributable to mother of 791 million yuan (-27.13%), net profit of 453 million yuan (-57.27%) after deducting non-return net profit of 453 million yuan (-57.27%).
The pharmaceutical industry remains steady, and investment in innovation continues to increase. The pharmaceutical industry achieved revenue of 15.995 billion yuan (+11.64%) in the first half of 2023, with a gross profit margin of 55.52% (+0.95pp). Hans achieved revenue of 556 million yuan, Han Song Premium earned 1,277 million yuan (+57.1%), and Su Kexin earned 478 million yuan (+32.7%). Revenue from new products and sub-new products continued to grow rapidly. Among them, however, sales of forbitel (mRNA COVID-19 vaccine) declined significantly year-on-year. The pharmaceutical industry invested 2,519 billion yuan (+22.16%) in R&D, accounting for 15.75% of the pharmaceutical industry's revenue.
Device diagnosis and medical services account for 25%-30%. In the first half of 2023, device diagnostics achieved revenue of 2,218 million yuan (-45.14%), with a gross profit margin of 52.57% (+18.12pp). In vitro diagnosis was under pressure due to the impact of anti-epidemic products. Medical services achieved revenue of 3.130 billion yuan (+7.27%) and a gross profit margin of 20.64% (+2.96pp). Offline hospital revenue recovered, online business was further focused, and spending was optimized.
At a time when research varieties are progressing smoothly and innovation and transformation is underway. Since 2020, the company's share of new products has continued to increase, R&D projects have progressed smoothly, and gradually entered the harvest period. Priority research is progressing smoothly. 1) The PD-1 inhibitor slulizumab (Hans-like): Three indications (MSI-H solid tumor, squamous non-small cell lung cancer, extensive small cell lung cancer) have been approved, and the marketing application for the fourth indication (esophageal squamous cell carcinoma) has been accepted in China. 2) Currently covering 1,500 hospitals, KG Bio was granted exclusive rights to develop and commercialize Hans-like monotherapy and two combination therapies in 10 Southeast Asian countries in 2019. 2) CAR-T product: 1) The first product, Eikaida (Achilenxil injection) 21.6, was approved for sale in China to treat adult patients with recurrent or refractory large B-cell lymphoma (r/r LBCL) after receiving second-line or higher systematic treatment; the other two indications are in the clinical stage. The second CAR-T product, FKC889, was clinically approved for clinical use in China at 22.3 and 22.12.
Profit forecast and investment suggestions: Based on the company's semi-annual performance, taking into account the significant decline in anti-epidemic products and the impact of Gland production line adjustments, we adjusted the operating income for 2023-2025 to 453.53, 52,757, and 61,408 billion yuan respectively (pre-adjusted values were 51.3, 602, 71.5 billion yuan), up 3.19%, 16.33%, and 16.40%; Guimu's net profit was 37.76, 4681, 5.588 billion yuan (adjusted value of 49,58.68 billion yuan), year-on-year increase 1.22%, 23.94%, 19.39% The company is one of the leading innovative drug enterprises in China. Innovative drugs have entered a period of centralized harvesting, structural improvements in the main business have returned to growth, and the “buy” rating has been maintained.
Risk warning: Extended mergers and acquisitions do not meet expectations; risk of failure in new drug development; risk of falling and scope of procurement of generic chemicals falling and exceeding expectations; risk of information and data used in research reports not being updated in a timely manner