Main points of investment
The performance is bright and the profitability is improved. In the first half of 2023, the company realized operating income of 10.734 billion yuan (+ 17.64%), net profit of 1.402 billion yuan (+ 61.53%), and net profit of 1.349 billion yuan (+ 66.53%). Among them, Q2 realized operating income of 5.132 billion yuan (+ 10.54%) in a single quarter, net profit of 592 million yuan (+ 2.63%), and net profit of 560 million yuan (+ 2.43%). 2023H1, the company has a gross sales margin of 53.28% (- 0.89pp) and a net sales margin of 14.70% (+ 5.03pp). In terms of period expenses, the sales expense rate is 20.30% (- 4.39pp); the management expense rate is 4.64% (- 1.92pp); the R & D expense rate is 10.02% (+ 0.88pp); and the financial expense rate is 1.54% (- 1.08pp). With the recovery of the hospital diagnosis and treatment side, the company achieved rapid growth in both revenue and profit side in the first half of the year, during which the expense rate decreased significantly and profitability improved significantly.
The structure of infusion products has been continuously optimized, and the types of generic drugs have been abundant. 2023H1, the infusion sector achieved revenue of 5.027 billion yuan (+ 14.27%), gross profit margin of 64.21%, revenue and gross profit margin are higher than other companies in the same industry. The proportion of closed infusion volume increased by 3.70% during the reporting period, and high gross profit varieties such as upright bags, multi-chamber bags and powder double-chamber bags led to the growth of revenue and profits in the company's large infusion plate. Parenteral nutrition in the sale of more than a dozen varieties, with the continued enrichment of varieties, is expected to achieve rapid growth. The market share of levofloxacin sodium chloride injection ranks first among the selected enterprises, with sales income of 234 million yuan (+ 2.83%) in the first half of the year. During the reporting period, the sales income of non-infusion drugs was 1.834 billion yuan (- 8.02%). Due to the influence of national and local collection and other external factors, the sales of some products decreased. Since the beginning of this year, the company has approved 29 items of generic drugs, approved 2 clinical items and declared 28 items of production, further enriching the company's product range in the fields of parenteral nutrition, anti-infection, male specialty, anaesthesia and analgesia, and diabetes. With the recovery of normal diagnosis and treatment, the promotion of new products and winning incremental products in hospital is expected to support the continuous growth of the company's generic drug business.
The growth of the API sector is strong, and synthetic biology is progressing smoothly. 2023H1, antibiotic intermediates and APIs as a whole achieved a business income of 2.37 billion yuan (+ 14.54%) and a gross profit of 673 million yuan (+ 19.46%). Chuanning Bio and its subsidiaries realized revenue of 2.417 billion yuan (+ 21.84%), net profit of 391 million yuan (+ 64.82%), and non-return net profit of 393 million yuan (+ 65.49%). The company's synthetic biology project is progressing smoothly, and the fermentation level and purity of red myrrh alcohol have reached the highest level in the industry, entering the sales stage, which is expected to contribute to a new increase in revenue. In the first half of the year, the penicillin market recovered rapidly, the market demand for some products was strong, the cost control was good, and the raw material drug sector achieved good growth.
Investment in R & D continues to increase, and innovative drugs are gradually entering the harvest period. 2023H1, the company invested 1.081 billion yuan in R & D (+ 28.25%), accounting for 10.07% of revenue. The company's core product, SKB264, has been approved by CDE for three breakthrough therapies. At present, the III phase clinical trial for the treatment of advanced TNBC with second-line or above standard treatment has reached the main research end point and is expected to be listed by the end of this year. The phase III clinical study of SKB264 monotherapy for TKI-resistant EGFR mutant NSCLC is in rapid progress. A166 has been declared to be listed for the indication of third-line treatment of HER2+BC. A167 has submitted an application for listing for third-line treatment of nasopharyngeal carcinoma and is expected to be approved for listing in 2024. A140 for RAS wild type mCRC is expected to apply for NDA in the second half of the year. In terms of internationalization, the company continues to strengthen cooperation with Merck & Co Inc, a number of global multicenter registration clinical studies led by Merck & Co Inc are progressing smoothly, and the commercial value of major international markets is highlighted.
Investment suggestion: we estimate that the company's revenue from 2023 to 2025 will be 207.78max 224.22 / 24.389 billion yuan, the net profit from its parent will be 23.26max 26.98 / 3.176 billion yuan, the corresponding EPS will be 1.58pm 1.83pm 2.15 yuan, and the corresponding PE will be 16.76max 14.45rap12.28, respectively, with a "buy" rating.
Risk hints: generic drug consistency evaluation progress lag risk; new drug research and development progress is not as expected risk; API price fluctuation risk; market risk.