The company's performance is in line with our expectations
The company announced 1H23 results: revenue was 15.28 billion yuan, up 0.5% from the same period last year; net profit from home was 1.26 billion yuan, down 34.5% from the same period last year, mainly due to a decline in the performance of associated companies; and adjusted net profit was 1.48 billion yuan, up 1.2% from the same period last year. The company's performance is in line with our expectations. The company guides positive growth in full-year revenue and adjusted homing net profit.
Trend of development
1H23 tumor and surgical pressure, 2Q23 achieved significant resuscitation. 1H23 sub-section: 1) tumor income 4.49 billion yuan (- 9.4% YoY), because the 1Q23 epidemic restricts in-hospital diagnosis and treatment and the loss of some tumor patients, we look forward to the follow-up progress of the third generation of whitening drugs (approved in May) and biosimilar drugs (3 have been approved in 2023). 2) surgery / analgesia income 2.33 billion yuan (- 7.5% YoY), the company said that calcitriol was included in the eighth batch of collection, non-exclusive generic drugs with an annual income of more than 500 million yuan have been included in collection. We are optimistic about the growth prospects of flurbiprofen gel paste and Lima prostaglandin tablets (approved in February). 3) the income of liver disease is 2.29 billion yuan (+ 14.0% YoY), which is mainly due to the rapid growth of Tianqing Gumei. 4) with respiratory income of 1.68 billion yuan (+ 11.2% YoY), the company said it had made a clear and smooth collection impact, and expected Tianyun's income to grow rapidly this year after it was included in health insurance. Quarterly, 1Q23 revenue / adjusted return net profit 6.65 billion / 290 million yuan (- 25% 2Q23 73% YoY), 2Q23 revenue / adjusted return net profit 8.63 billion / 960 million yuan (+ 30% Universe 21% YoY), significantly recovered in the second quarter.
With the increase of R & D, the achievements of innovation have been gradually landed. 1H23, including capitalized R & D investment of 2.6 billion yuan (84% of innovative drug R & D investment), accounting for 17% of revenue, company guidelines annual R & D investment accounted for 19% of income.
Seven Becton Dickinson & Co (4 License-in) were completed in the first half of the year, and the company expects to have 1-2 Becton Dickinson & Co projects in the second half of the year.
The revenue of 1H23 innovative drugs is 3.86 billion yuan (+ 10.6% YoY), accounting for 25% of the income (+ 2.4ppts). The company expects that: 1) innovative drugs: ALK inhibitor 2H23 is approved, PD-L1 (first-line treatment of small cell lung cancer with amlotinib), ROS1 inhibitor, JAK inhibitor and IDH1 inhibitor are approved in 2024, and five indications such as amlotinib combined with first-line treatment of small cell lung / liver / renal cell carcinoma are also expected to be approved in 2024. ROCK2 inhibitors, CDK2/46 inhibitors, KRAS inhibitors, PI3K inhibitors and antimicrobial peptides were approved in 2025, and more than 12 new drug varieties were created in 2025. 2) generic drugs: recombinant human coagulation factor VIII and Dishu monoclonal antibody 2H23 were approved, and Lilarutide was approved in 2024.
1H23 SG&A rates fell 3.4ppts to 42.2% year-on-year, while the company guided full-year rates of 42%.
1H23, the administrative expense rate decreased by 0.8ppts to 7.0% compared with the same period last year, and the sales expense rate decreased by 2.7ppts to 35.2% compared with the same period last year. The company promotes cost transparency and traceability management to help reduce costs and increase efficiency.
Profit forecast and valuation
Keep the profit forecast unchanged. The current share price corresponds to 15.8x/13.7x 2023 amp 2024 adjusted Pmax E.
Keep the outperform industry rating and target price of HK $4.5 unchanged, corresponding to 23.6 pound 20.4 times adjusted price-to-earnings ratio, which has 49.5% upside compared with the current share price.
Risk
The price reduction of collective mining is higher than expected, the progress of product listing is not as expected, and the progress of reducing cost and increasing efficiency is not as expected.