Qianhong Pharmaceutical has been operating steadily for many years, and its performance has shown volatile growth. Founded in 1979, Qianhong Pharmaceutical is a leading manufacturer and operator of heparin and protease drugs in the domestic biochemical pharmaceutical industry. Over the years, the company's overall performance has shown a volatile growth trend. The company's revenue increased from 1,322 billion yuan in 2018 to 2,404 billion yuan in 2022, with a CAGR of 15%. Exports of heparin sodium APIs in 2023 were under short-term pressure due to the withdrawal of stocks from the international market. The company's revenue for the first three quarters of 2023 was 1,466 billion yuan, down 11% from the previous year. The fluctuating trend on the company's profit side is basically in line with the revenue side. Net profit in 2022 reached a high of 323 million yuan, but profit for the first three quarters of 2023 was only 198 million, mainly affected by weak demand side and a high base for the same period last year, down 26% year on year. As the raw material inventories of downstream pharmaceutical companies gradually bottom out, demand for heparin APIs is expected to pick up in 2024. Combined with the low base in 2023, combined with the impact of the domestic sales volume of enoxaparin sodium preparations and the increase in OTC sales of active enzyme varieties, the company's revenue and profit side are both expected to achieve relatively rapid growth in 2024.
Focus on the new upward cycle of heparin and actively expand upstream to build advantages throughout the industry chain. Heparin drugs are the main clinical anticoagulant drugs. The global market size of heparin APIs is growing steadily. China exports about 100 to 200 tons a year, making it the world's main supplier of heparin raw materials. Since 2022, the impact of the global epidemic has gradually weakened, and heparin prices have declined rapidly. According to data from the General Administration of Customs, the average monthly export price of heparin in China was 11,779 US dollars/kg in July 2023, but the monthly supply of only 5 tons was already at a historic low. Affected by the relationship between supply and demand, as of October 2023, the price of heparin had fallen rapidly to 4,805 US dollars/kg, which is basically the same level as the heparin price level in 2018. Although the price margin is not fully apparent, it is already in the end range of the second heparin cycle, with heparin The relationship between supply and demand continues to improve, and we expect 2024 to begin a new upward cycle in heparin prices. At the same time, the company set up a joint venture with Muyuan Co., Ltd., the largest pig breeding enterprise in China, to further integrate upstream industry resources and help build advantages throughout the heparin industry chain. On the pharmaceutical side, the company's enoxaparin won the bid for the eighth batch of national collection, and the barefoot variety is expected to increase performance. In addition, the company reached a strategic cooperation with Bayer Group on Daxi Compound Digestive Enzyme Capsules, introduced related products into the Bayer OTC sales platform, and actively explored the out-of-hospital market, which is expected to achieve strong growth in pharmacy channels.
Deploy innovative drugs and explore the company's second growth curve. The company's CDK9 inhibitor QHRD107 for hematoma treatment is a new type of targeted anti-cancer drug independently developed by the company. Phase II clinical trials for the treatment of acute myeloid leukemia (AML) are being carried out domestically. Currently, no highly selective CDK9 inhibitors have been approved for sale worldwide. The company's product is leading the world, and it is used for oral administration, and patient compliance is good. In addition, the company also has an innovative drug research pipeline for various indications such as glioma, acute ischemic stroke, and slow growth in children lacking growth hormone, which is expected to open up the company's second growth curve.
Investment suggestions: We expect the company to achieve revenue of 21.98/24.18/2,833 billion yuan and net profit of 227/3.26/422 million yuan respectively in 2023/2024/2025.
According to the relative valuation of the company's business, we gave the company 33.0 times PE in 2023, which is lower than the industry average (36.0 times PE), and the corresponding target price is 6.48 yuan. Considering that the company's API is expected to start a new heparin upward cycle next year, Henan Qianmu will start production to help cover the entire industry chain, the pharmaceutical end of the Daxi compound digestive enzyme off-hospital market is accelerated, and the market share of the barefoot variety Enoheparin has won the bid. As the company's innovation pipeline advances, the company's valuation is expected to continue to rise, coverage for the first time, and a “recommended” rating.
Risk warning: 1) Risk of heparin price fluctuations: The heparin industry to which the company belongs has cyclical properties. The price of heparin crude products, API prices, and demand will be characterized by cyclical fluctuations, which may affect the company's performance. 2) Drug development progress falls short of expectations: Innovative drug development risks are high, and there is a risk of R&D failure.
3) Impact of national policies: Health insurance negotiation policies may be adjusted, thereby affecting prescriptions for heparin-like drug formulations, thereby affecting the company's pharmaceutical sales.