Introduction to this report:
Performance of 2023Q3 is under pressure due to multiple factors such as the tightening of the hospital environment, fluctuations in API prices, and Zuosha collection. It is expected that after being included in health insurance at the end of the year, tobramycin will quickly open up market space and accelerate volume, maintaining an increase in holdings rating.
Key points of investment:
Maintain the “Overweight” rating. 2023Q1-3 had revenue of $12.65 billion (-2.8%), net profit of $1,084 million (-3.8%), net profit of net income of $1,084 million (-3.8%) after deducting non-net profit of $1,049 million (-6.0%). Among them, Health Yuan (excluding Livzon Group and Livumab) achieved net profit of 612 million yuan (-4.2%). In the single quarter of 2023Q3, the company achieved revenue of 3.93 billion yuan (-11.6%), net profit of 268 million yuan (-17.6%), net profit of 267 million yuan (-14.4%) after deducting non-return net profit of 267 million yuan (-14.4%). Considering that the company's products are affected by collection, the 2023-2025 EPS was lowered to 0.76/ 0.84/0.97 yuan (previously 0.89/1.00/ 1.15 yuan). Referring to comparable company valuations, the target PE for 2023 was 18X, and the target price was lowered to 13.68 (-1.00) yuan. They are optimistic about tobramycin dosage and maintain an increase in holdings rating.
Chemical agent revenue is under pressure due to collection and tightening of the hospital environment, and the risk of impairment of rizumab has been released. 2023Q3 was affected by many factors: revenue from the respiratory sector was 1,112 billion yuan (+29.0%), slower than Q2, due to the slowdown in admission to hospital after Zuosha was included in the collection list, which is expected to be offset by tobramycin after being included in health insurance at the end of the year; API and intermediate revenue was 3,970 billion yuan (-2.1%), mainly affected by falling prices of meropenem, but the price decline narrowed month by month, and is expected to stabilize. The impact of rizumab on Guimu's net profit is -412 million yuan, and the impact of Q3 alone is -171 million yuan. With the completion of the impairment of rizumab, the impact on Guimu's net profit is expected to weaken in 2024. Traditional Chinese medicine pharmaceutical products achieved revenue of 1,291 billion yuan (+49.5%), mainly contributed by antiviral granules and ginseng fuzheng injection.
Tobramycin inhalation solution is expected to enter medical insurance for rapid release, relieving the collection pressure of levosalbutamol. Tobramycin inhalation solution was approved for marketing at the end of 2022. It is the first inhaled antibiotic in China and is expected to become the next major product after eprazole. Furthermore, L-salbutamol nebulized inhalation solution is the only inhalation preparation in the ninth batch collection list, and it is expected that collection will be carried out in 24Q1. In the future, the company is expected to fill the collection product gap through the expansion and volume of inhalation formulation pipelines.
Catalysts: Health insurance prices exceeded expectations; volume exceeded expectations after being included in health insurance;? Risk warning: collection risk; risk of price fluctuations of APIs.