occurrences
Conn Bay announced a pre-increase in its 2023 results. Net profit for 2023 is estimated to be 591 million yuan to 680 million yuan (year-on-year increase of 65.00%-90.00%); net profit after deducting non-return to mother is estimated to be 538 million yuan to 604 million yuan (up 11.33%-25.00% year on year).
Incident reviews
The growth of the main business drives the company's revenue growth, and the continuous optimization of profitability and the steady development of the main business drives the company's revenue growth. The company's revenue in '23 was about 6.735 billion yuan, up 12.25% year on year. 23Q4 revenue was about 1,512 billion yuan, up 2.58% year on year.
The company's profit decreased by about 75 million yuan due to changes in the market value of Jiahe Biotech Co., Ltd. in '23, and continued to grow during the same period, mainly due to the company's transfer of 7.84% of Jiangxi Zhenshiming Pharmaceutical's shares and an increase of 87 million yuan in profit. The net profit for 23Q4 is expected to be -0.32 billion yuan - 57 million yuan, -124.47% - -56.80%; net profit without return to mother is estimated to be 28 million yuan - 94 million yuan, or -31.41% - +132.22% year-on-year.
Investment in R&D has been increased in 23 years, and innovation capabilities have gradually improved
The company continued to step up research and development efforts, investing about 314 million yuan in R&D throughout '23, of which about 300 million yuan was spent on a cost basis, an increase of about 53% over the previous year. As of the first half of '23, 40 new R&D projects were completed, an increase of 67% over the previous year, mainly raw materials and generic drug development, MAH and hospital formulations, and post-marketing clinical projects. Currently, there are more than 180 research projects, including more than 20 innovative projects. In the first half of 2023, the company obtained consistency evaluation approvals for azithromycin for injections, piperacillin sodium, and tazobactam sodium for injections of 2 varieties (4 product regulations), risperidone oral solution obtained generic drug registration approval, pirfenidone solution for inhalation obtained drug clinical trial approval, and obtained authorization and accepted 16 patents.
Investment advice: Maintaining a “buy” rating
Kangenbei has gone through state-owned investment and mixed reform. The core development strategy focuses on the traditional Chinese medicine health sector. At the same time, Kangenbei's 1 billion yuan single product, Enteric Pain Relievers, has a good competitive pattern, and there is plenty of room for growth. According to the latest performance forecast and actual operating estimate adjustments, we lowered our profit forecast. The company's revenue for 2023-2025 was 67.32/77.11/8.774 billion yuan (previous value was 70.45/80.82/9.138 billion yuan), respectively, up 12.2%/14.5%/13.8% year on year, and net profit to mother was 6.56/8.53 billion yuan (previous value: 6.79/884/1,041 billion yuan), respectively, up 83.3%/29.9%/19.1% year on year, respectively. The corresponding valuation is 18X/14X/12X. We maintain a “buy” rating.
Risk warning
Risk of changes in industry policies, risk of R&D innovation, etc.