Events:
The company recently released its semi-annual report for 2023, 23H1 achieved operating income of 6.791 billion yuan (+ 21.99%), net profit of 1.606 billion yuan (+ 53.16%), and net profit of 1.541 billion yuan (+ 46.67%). Single Q2 realized operating income of 2.856 billion yuan (+ 0.40%), net profit of 404 million yuan (- 28.49%), and non-return net profit of 363 million yuan (- 35.26%).
Comments:
Cardio-cerebral vascular category: abundant academic evidence and steady increase in market share. The company's cardio-cerebrovascular 23H1 business achieved an income of 2.511 billion yuan (+ 10.44%), achieving restorative growth. The company's "Tongluo Sanbao" is based on TCM venography, has rich evidence of evidence-based medicine, continues to expand academic influence and enhance market share.
Respiratory system category: Lianhua clear plague stabilized, the growth of new products can not be ignored. The company's 23H1 respiratory category achieved operating income of 3.088 billion yuan (+ 20.95%), the faster growth rate was mainly due to the large demand for Lianhua scavenging in the first quarter. We believe that "COVID-19 indication" has indeed played an important role in the growth of Lianhua Qingwen in the past three years, but compared with 2019 and before, the drug has greatly improved its brand awareness and terminal coverage. Looking forward to the future, the proportion of "COVID-19 indications" may gradually decrease, and we should also pay attention to the growth potential of "common cold + influenza" indications. Lianhuaqing cough tablets are expected to become a 1 billion potential variety. Lianhuaqing cough tablets were approved to be registered and listed in 2020, and were successfully renewed through health insurance negotiations at the end of 2022 and were included in the new version of the health insurance catalogue. At the same time, they were recommended by COVID-19 and influenza diagnosis and treatment programs in many provinces. Future growth drivers:
1) promoting the conversion to OTC will be more conducive to volume at retail terminals; 2) it is expected to enter the new base drug catalogue and increase the coverage of medical institutions.
The research and development of traditional Chinese medicine is strong, and the ability of commercial promotion is outstanding. The company is currently researching more than 40 innovative varieties of traditional Chinese medicine, and actively develops and declares new drugs independently. The company's innovative layout of traditional Chinese medicine is in a leading position in the industry, while giving sufficient support to the research and development of innovative traditional Chinese medicine at the end of the new drug approval policy, and the company has outstanding commercial transformation capabilities in the industry. The core products "Tongluo Sanbao" and "Lianhua Qingwen" have developed into representative products in their respective fields, we are optimistic about the inheritance and innovative development of the company's traditional Chinese medicine business, and are expected to continue to grow steadily in the future.
Profit forecast and investment advice. In view of the gradual increase in the company's cardio-cerebrovascular market share, new respiratory products are expected to gradually increase, the company has strong research and development of traditional Chinese medicine, and the commercial promotion ability is outstanding. It is estimated that the company will achieve a revenue of 127.93 shock in 2025, a net profit of 25.13 shock, a net profit of 2.865 and 1.94 yuan per share, and an EPS of 1.71 and 1.94 yuan per share. The PE is 15.41, 13.51, and 11.92 times, maintaining a "buy" rating.
Risk tips: collection of proprietary Chinese medicine; price risk of traditional Chinese medicine; new product promotion is not as expected.