Event: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 1975.1 billion yuan (+13.1%); net profit of 3.8 billion yuan (-21.1%); net profit of 3.8 billion yuan (-21.1%); and net profit after deducting non-return to the mother of 3.3 billion yuan (-10.6%).
2023Q3 achieved revenue of 649.2 billion yuan (+3.2%); net profit of 1.19 billion yuan (+6.1%); net profit of 1.11 billion yuan (+8.7%) after deducting non-return net profit of 1.11 billion yuan (+8.7%).
The three-quarter report highlights resilience. In terms of revenue, in the first three quarters of 2023, the company's pharmaceutical distribution business achieved sales revenue of 177.19 billion yuan (+14.2%); pharmaceutical retail business revenue of 6.53 billion yuan (+15%); and the pharmaceutical industry achieved revenue of 20.8 billion yuan (+5.1%). In terms of profit, in the first three quarters of 2023, the company achieved net profit attributable to shareholders of listed companies of 3.8 billion yuan (- 21.1%) due to the relocation income of the subsidiary Qingchunbao in the same period last year and the impact of one-time special gains and losses such as asset impairment preparations calculated by Shangyao Kangxino, the company achieved net profit of 3.8 billion yuan (- 21.1%); net profit attributable to shareholders of listed companies was 4.27 billion yuan (+8.6%) after excluding the impact of the one-time special profit and loss mentioned above. Among them: industrial business contributed 1.81 billion yuan (+9.7%); commercial business contributed 2.63 billion yuan (+8.8%); and major participating companies contributed 463 billion yuan in profit (excluding the influence of Shanghai Pharmaceutical Cansino), a year-on-year decrease of 3.5%.
The innovation pipeline has entered a harvest period, and the market potential is huge. As of the end of 2023Q3, 3 new drug pipelines have submitted pre NDA or marketing applications. In the first three quarters of 2023, the company added 3 new drug products to its new drug pipeline, 2 of which were innovative drugs, namely WST04 (an oral microbioactive agent intended for the treatment of advanced malignant solid tumors. Clinical trial applications were accepted by the State Drug Administration in September 2023) and I035 (an immunomodulator that can inhibit intestinal inflammatory response and enhance intestinal immunomodulation. Clinical trial applications were accepted by the National Drug Administration in September 2023). 2023Q3 added 2 new varieties (2 product regulations) and passed the generic drug consistency evaluation, bringing the total number of products approved for consistency evaluation to 55 varieties (79 product regulations).
In October 2023, Shanghai Pharmaceutical Cloud Health completed Series C financing of 500 million yuan. Shanghai Pharmaceutical Cloud Health has established an integrated “Yibao” brand, with innovative markets outside of pharmacies as the core, building professional pharmaceutical service capabilities as the cornerstone, and committed to innovative links between pharmaceutical companies, hospitals, and patients. It has now built China's leading full-cycle service platform for the commercialization of innovative drugs. This round C financing is jointly led by the Shanghai Comprehensive Reform Fund and ICBC Investment. The Shanghai Biomedical Fund continues to support it, and is expected to fully begin the path of independent development and listing in the future.
Profit forecasts and investment advice. Net profit from 2023-2025 is estimated to be 4.87 billion yuan, 5.73 billion yuan, and 6.77 billion yuan respectively, up -13.3%/17.7%/18.2% respectively, maintaining the “buy” rating.
Risk warning: risk of industry policy fluctuations; R&D progress or failure to meet expectations; risk of impairment of goodwill.