Summary: In the first three quarters of 2023, the company achieved operating income of 915 million yuan (+18.5%, in parentheses, same below); net profit of 192 million yuan (-3.0%); net profit after deduction of 188 million yuan (+3.6%); performance in line with market expectations.
Q3 maintained good growth in a single quarter, and profitability is under pressure in the short term, and is expected to increase as formulations are released: on a quarterly basis, the company's 2023Q3 revenue and net profit grew by 20.4% and -3.8% year-on-year, with month-on-month growth rates of 15.9% and 113%, respectively, and Q3 performance maintained good growth. The company's profitability is under pressure in the short term. In terms of gross margin, the gross margin for the first three quarters of 2023 fell 3.9 pct to 58.6% year on year, mainly because the API business was affected by global capacity removal. With the release of products, the company's sales expense ratio for the first three quarters of 2023 fell by 2.9pct to 4.9% year on year; the financial expense ratio increased by 3.3 pct year on year, mainly due to the increase in interest expenses. Overall, the company's net interest rate for the first three quarters of 2023 fell 3.7 pct to 19.3% year on year; with the release of the company's pharmaceutical products, profitability is expected to increase.
All businesses maintained good growth: by business, in the first three quarters of 2023, 1) product sales revenue was 776 million yuan (+12.3%), of which API revenue was 674 million yuan (+9.7%), formulation revenue was 102 million yuan (+33.3%), and the pharmaceutical business continued to expand; 2) technology revenue was 82.25 million yuan (+59.8%); 3) equity share revenue of 44.98 million yuan (+75.0%).
The product matrix has been continuously improved. Through gathering light, the company's product matrix has been continuously improved. Currently, various drugs such as injectable micafennet sodium, oseltamivir phosphate capsules, agatroban injections, oseltamivir phosphate, oseltamivir phosphate dry suspensions, injectable voriconazole, and eribulin mesylate injections are on the market; and research and development of complex pharmaceutical products such as iron and inhalants has been continuously promoted, creating a new growth curve. The company's agatriban injection and oseltamivir phosphate dry suspension won the bid in the eighth batch of national drug collection. It is expected that the volume will be released quickly after the bid is approved.
Profit forecast and investment ratings: Considering the decline in demand and prices caused by global API inventory removal, we lowered the company's 2023-2024 net profit forecast of 429/579 million yuan to 245/296 million yuan, and predicted net profit of 378 million yuan in 2025; the current market value corresponding to 2023-2025 PE was 69/57/45 times, respectively. The company's pharmaceutical business continued to increase, and technology revenue and equity sharing maintained a high growth rate, covering the first time, giving it an “increased holding” rating.
Risk warning: collection risk, R&D risk falling short of expectations, etc.