Company Profile
Huadong Medicine Co., Ltd. specializes in the development, manufacture and marketing of medical products and vaccines. The products are intended primarily for the treatment of tumors, immune disorders, endocrine disorders, orthopedic and traumatological disorders, digestive system diseases and viral diseases. (Source: MarketScreener)
Event
Huadong Medicine ("the company") released its financial results for the third quarter of 2023.
For the third quarter of 2023, the company reported CNY30.395 billion in revenue, up 9.10% year-on-year; CNY2.189 billion in net profit attributable to shareholders, up 10.48% year-on-year; and CNY2.160 billion in net profit attributable to shareholders and excluding gains and losses from non-recurring items, up 19.01% YoY.
Comments
The company's performance was in line with expectations, with its profit growth faster than revenue growth.
The company's pharmaceutical industrial business maintained a rising trend, and its stronger business presence in all segments brought about a second growth curve.
The company's industrial microorganism business was reinforced. Its beauty care business witnessed a rapid rise in sales volume due to the growth of young-keeping needles. The company also acquired botulinum business to expand its product lines.
The company's BD also advanced. Its deepend layout in topical preparations is expected to stand out in the differentiated segments. Its liraglutide was approved for weight-loss indication, as the company builds up its pipelines for sugar reducing and weight loss.
Earnings forecast and investment recommendation
As a strong player in conventional pharmaceuticals, the company has changed for the better in its four major businesses -drugs, retail, industrial microorganism, and beauty care.
The retail business grows steadily and the drugs business was free from the burden of centralized procurement. Multiple innovative drugs have been and will be marketed and are likely to witness a rise in sales volume this year and next year. The company's industrial microorganism and beauty care business also grow robustly.
We revise our forecasts of the company's EPS to CNY1.64, CNY2.04 and CNY2.49 for 2023, 2024 and 2025, corresponding to a PE ratio of 24.3x, 19.6x and 16.1 x, based on the closing price on October 25, 2023.
We maintain the rating of "Buy".
Potential risks
Risk in centralized procurement of drugs; new drugs research and development risk; intensified competition.