1-3Q23 performance meets our expectations
The company announced its results for the first-third quarter of 2023: revenue of 58.18 billion yuan, an increase of 6.16% over the same period last year; net profit of 3.79 billion yuan, corresponding to 2.332 yuan per share, an increase of 9.12% over the same period last year, deducting 3.44 billion yuan of non-return net profit, an increase of 9.72% over the same period last year. The performance is in line with our expectations.
Trend of development
In the third quarter alone, the company's profits maintained steady growth, and gross profit margin improved year-on-year and month-on-month. In the third quarter alone, the company's operating income was 18.21 billion yuan, an increase of 3.6% over the same period last year, and its net profit was 980 million yuan, an increase of 10.8% over the same period last year. We believe that it is mainly due to the rich business portfolio and the balanced development of diversified business. In the first and third quarters of 2023, the company's gross profit margin was 20.1%, an increase of 0.3 percentage points over the same period last year. In the third quarter alone, the gross profit margin was 18.4%, an increase of 0.6 percentage points over the same period last year and 0.4 percentage points higher than the previous quarter. In the first-third quarter of 2023, the company's sales expense rate was 8.1%, unchanged from the same period last year; the management expense rate was 3.0%, up 0.1% from the same period last year; and the R & D expense rate was 1.0%, down 0.2% from the same period last year.
Actively lay out the large medical plate. At present, the company is focusing on the development of medical services, traditional Chinese medicine health care, modern pension and medical device industry through new construction, joint venture, cooperation and other ways, which is still in the stage of layout and investment expansion. As of August 2023, the company has invested / participated in projects such as Guangzhou Baiyunshan Hospital, Runkangyue subsidiary, Guangzhou Zhongcheng Medical device Industry Development Co., Ltd., Baiyunshan first Care Company and Baiyunshan Health Care Company, etc.
The pharmaceutical sector actively promotes its time-honored brands to coruscate new vitality and launch new products in a healthy and orderly manner. According to the company announcement, the company: 1, creatively implement the "dual-brand" strategy in the domestic market, promote brands and products to quickly open the national market; 2, concentrate resources to cultivate "superstar varieties", put forward the concept of "fashionable traditional Chinese medicine"; 3, increase investment in the marketing of time-honored brands, participate in the establishment of time-honored brand funds; 4, support the innovation of marketing mode of time-honored brands and promote the improvement of sales income. In addition, according to the company announcement, the main new products launched by the company in the big health plate in recent years are the Caragana series and the Li Xiaoji series. Lixiaoji has been on the market since 2019 and is currently carrying out a comprehensive stock-laying work. Li Xiaoji launched a new product series for the company in 2022 and is currently in the stage of building a sample market.
Profit forecast and valuation
We keep the EPS forecasts of 2023 and 2024 unchanged at 2.69 and 2.96 yuan. The current A share price corresponds to the price-to-earnings ratio of 11.1 times 2024 / 10.1 times 2024, and the H share price corresponds to 6.9 times / 6.1 times earnings in 2023 Universe. We maintain the A-share and H-share outperform industry ratings, maintain the A-share price of 38.0 yuan, corresponding to 14.1 times 2024 / 12.8 times earnings, with 27.5% room to rise compared to the current share price; maintain the H-share price of 27.4 Hong Kong dollars, corresponding to the 2023deband 2024 9.1 times / 8.0 times earnings ratio, 31.7% room to rise compared to the current stock price.
Risk
The competition in the consumer market is fierce, and the price of Danan medicine is under pressure.