1H2023's performance met our expectations
The company announced 1H2023 results: revenue of 4.29 billion yuan, +12.31% year on year; net profit of 570 million yuan, +0.14% year on year; net profit after deducting non-return net profit of 6.2 billion yuan, +6.58% year on year; in line with our expectations.
Development trends
APIs: Continue to explore market potential and maintain a growth trend. 1H2023, APIs and intermediates achieved revenue of 1,585 billion yuan, +43.7% year on year, gross margin of 43.7%, and -1.8ppt year on year. The API approval/review passed 12 varieties (including 6 domestic, 5 European, and 1 other), and completed 21 new product registration applications. As of the end of June 2023, the company had 60 API registration numbers reviewed and approved by the State Drug Administration, 80 DMF numbers registered with the FDA, and 51 products that had obtained European CEP certification. 1H2023 The international situation is complicated and competition in the API industry is intensifying. The company is developing new products and new business market share in all aspects, insists on combining endogenous growth and epitaxial expansion, and API sales have maintained a growing trend.
Formulation: Sales management changes have achieved remarkable results, and business is developing rapidly. At 1H2023, finished drugs achieved revenue of 2,651 billion yuan, +22.3% year on year, gross margin was 70.1%, and -5.9ppt year on year. On the domestic side, 1H2023 has received 11 new approved products, completed 8 newly declared products, and at the same time insisted on building a product-driven technology platform. Currently, the company is developing more than 60 products. As of the end of June 2023, there were a total of 50 products approved by the State Drug Administration and passed the consistency evaluation. 1H2023. Three of the company's products, including losartan, potassium, hydrochlorothiazide tablets, felodipine sustained-release tablets, and voriconazole for injection, successfully won the bid in the eighth batch of national collections. Overseas, revenue from the US pharmaceutical business was +73.3% year-on-year, with strong growth.
1H2023 has obtained 4 US ANDA document numbers (including temporary approval numbers) and completed 2 new product declarations. As of the end of June 2023, a total of 79 of the company's products had received the US ANDA document number (excluding temporary approval).
It has the advantage of large-scale formulation and API production capacity, and has formed an independent marketing system covering both at home and abroad. 1) Production capacity side: As of the end of June 2023, the company has passed various international mainstream official quality system certifications in China, Europe and the United States, and has an anti-tumor solid formulation workshop, a water acupuncture workshop and a freeze-dried powder acupuncture workshop. 2) Sales side: As of the end of June 2023, the company's sales area covered 31 provinces, cities and autonomous regions across the country. A total of 28 formulation products were selected in the “National Centralized Procurement and Continuation of National Procurement Agreements by Provinces and Cities”. Overseas offices have been set up in 14 countries around the world, and subsidiaries have been set up in the US, Germany, etc.
Profit forecasting and valuation
Keep the 2023 and 2024 earnings forecasts unchanged. The current stock price corresponds to the price-earnings ratio of 16.9 times/12.6 times of 2023/2024. It maintains outperforming industry ratings, but due to recent systematic adjustments in the pharmaceutical sector, we lowered our target price of 26.7% to 21.90 yuan, corresponding to 22.0 times the 2023 price-earnings ratio and 16.4 times the 2024 price-earnings ratio, which is 29.7% upward from the current stock price.
risks
New product development registration risks, quality control risks, safety and environmental protection risks, risk of industry policy changes, risk of price fluctuations of major API products, risk of exchange rate changes.