Matters:
Recently, the company announced its three-quarter report for the year 23. Q1-3 revenue was 30.04 billion yuan (+9.1% yoy), non-net profit of 2.16 billion yuan (+13.6% yoy), and after deducting profit and loss effects from equity incentives and participating R&D institutions, etc., it was not 2.46 billion yuan (+19.4% yoy). Revenue for the third quarter alone was 10.01 billion yuan (+3.6%), minus non-net profit of 730 million yuan (+16.4%), and profit exceeded market expectations.
Commentary:
Pharmaceutical industry: From January to September 2023, it achieved operating income of 8.994 billion yuan (including CSO business), an increase of 9.48% over the previous year; realized net profit of 1,835 billion yuan, an increase of 13.41% over the previous year; achieved revenue of 2,940 billion yuan (including CSO business) in the single third quarter, an increase of 8.34% over the previous year, and achieved net profit of 609 million yuan, an increase of 10.13% over the previous year.
Medical aesthetics: The company's overall medical and aesthetic sector continued to grow rapidly. From January to September 2023, it achieved a total revenue of 1,874 billion yuan (excluding internal offsetting factors), an increase of 36.99% over the previous year. Overseas, British Sinclair, a wholly-owned subsidiary, actively overcame the impact of the slowdown in global economic growth and continued to expand the global medical and aesthetic market. During the reporting period, it achieved sales revenue of 110 million pounds (about 973 million yuan, up 23.27% year on year), achieved an EBITDA of 17.29 million pounds (about 148 million yuan), and continued to achieve operating profit.
On the domestic side, Shinkeli Aesthetics achieved a total revenue of 824 million yuan from January to September 2023, an increase of 88.79% over the previous year. While achieving good profits, its contribution rate to the company's overall profit has also increased rapidly. It is expected that it will continue to maintain excellent performance and fully complete its annual business goals.
Industrial microbiology: From January to September 2023, the overall revenue of the sector achieved a year-on-year increase of 36.22% after excluding specific commercial product businesses. The company continued to improve its industrial layout. During the reporting period, the company's industrial microbiology business made positive progress in expanding the market for ADC raw materials and specialty APIs, completed the conclusion of strategies and business cooperation agreements with a number of overseas customers, and accelerated the pipeline layout and market promotion of the animal insurance business.
Investment suggestions: Considering the impact of continuous R&D investment on the industrial side and disruptions in the pace of short-term commercial delivery, we have lowered our profit forecast. The company's net profit for 2023-2025 is estimated to be 29.1, 35.3, and 4.32 billion yuan respectively (the original forecast values were 29.5, 35.4 billion and 4.31 billion yuan), up 16.4%, 21.1%, and 21.8% year on year.
The current stock price corresponds to PE 25, 21, and 17 times. According to segmental valuation calculations, the company's pharmaceutical industry had a corresponding valuation of 63.6 billion yuan in 2023 (traditional pharmaceuticals+12.1 billion yuan+innovative drugs and biosimilar pharmaceuticals+5.6 billion yuan for industrial microorganisms), a corresponding valuation of 23.4 billion yuan for the medical and aesthetic business, and a corresponding valuation of 5.4 billion yuan for the pharmaceutical business. The company's reasonable valuation in 2023 was 92.4 billion yuan, and the corresponding stock price was 53 yuan. Maintain a “Recommended” rating.
Risk warning: 1. The development of innovative drugs and medical and aesthetic products has fallen short of expectations; 2. Drug collection and medical insurance cost control have increased; 3. The competitive pattern of endocrine, self-immune, and oncological drug markets has worsened.