Main points of investment
Non-main business is a drag on apparent growth, and performance is slightly under pressure. In the first three quarters of 2023, the operating income was 1.719 billion yuan, down 5.5% from the same period last year, and the return net profit was 461 million yuan, down 0.35% from the same period last year. The non-return net profit was 437 million yuan, down 3.33% from the same period last year. The net interest rate was 51.86%, an increase of 4.3pct over the same period last year, which was mainly due to changes in business structure. 2023Q3 realized operating income of 566 million yuan in a single quarter, down 4.72% from the same period last year, and its net profit was 139 million yuan, down 11.93% from the same period last year. The net profit from non-parent was 134 million yuan, down 13.86% from the same period last year.
Dain Pharmaceutical, a subsidiary, performed smoothly. In the first three quarters of 2023, the operating income was 1.686 billion yuan, an increase of 5.03 percent over the same period last year, and the net profit was 902 million yuan, an increase of 8.61 percent over the same period last year. 2023Q3 achieved an operating income of 555 million yuan in a single quarter, an increase of 5.5% over the same period last year, a net profit of 273 million yuan, a decrease of 3.3% over the same period last year, and a net interest rate of 49.2% per quarter, a decrease of 4.4pct over the same period last year, which is estimated to be related to the high base of net interest rate in the third quarter of 2022 and the investment of the company.
Subsidiary Walter Information applied for bankruptcy liquidation and continued to optimize the industrial layout. The company announces that the wholly-owned subsidiary Walter Information continues to lose money and is insolvent due to mismanagement, and intends to apply to the court for bankruptcy liquidation (Walter Information applies to the court for bankruptcy liquidation in the capacity of the debtor, there is uncertainty about whether the court accepts it or not and the final decision). The application for bankruptcy liquidation of Watt Information is in line with the relevant requirements of Shandong SASAC and Shandong State-owned assets Investment Holdings Co., Ltd. on the governance of loss-making enterprises, and in line with the company's strategic planning of focusing on the main business of medicine and optimizing the layout of industries. Due to the lack of competitive advantage, the operation continues to deteriorate, and timely bankruptcy liquidation is conducive to reducing losses, which is in line with the interests of shareholders of listed companies. After the court ruled that Walter Information entered the bankruptcy proceedings, Walter Information will no longer be included in the scope of the company's consolidated statements. Walter Information earned 2.98 million yuan and lost 15.66 million yuan from January to June 2023. Therefore, the bankruptcy liquidation of the subsidiary will not have a significant impact on the company's operating performance and continuing operations, and is expected to reduce the performance drag brought by non-main business.
Profit forecast and valuation: taking into account the drag and divestiture of non-main businesses as well as operating conditions, we adjust our profit forecasts. It is estimated that the net profit from 2023 to 2025 will be 5.68,6.70 and 772 million yuan respectively, an increase of 7.9%, 17.8% and 15.3% compared with the same period last year. The closing price on October 20, 2023 corresponds to a PE of 12.6,10.7 and 9.3X, maintaining the "overweight" rating.
Risk tips: product collection price reduction, sales below expectations, negative public opinion, fluctuations in the number of births, increased competition, raw material price fluctuations and other risks.