Incident review
On January 29, 2024, the company announced its 2023 annual results forecast. In 2023, the company expects to achieve revenue of 3,095 billion yuan, an increase of 11%; net profit of 1,178 billion yuan, a year-on-year decrease of 25%; net profit after deduction of 1,173 billion yuan, an increase of 40% year on year; looking at a single quarter, the company is expected to achieve revenue of 1.03 billion yuan, an increase of 48% year on year; achieve net profit of 418 million yuan, an increase of 134% year on year; achieve net profit without return to mother 4.16 100 million yuan, an increase of 131% over the previous year.
Management analysis
The impact of insulin collection is gradually being clarified, and the domestic substitution process is being accelerated. Since May 2022, national special insulin collection has been launched in various provinces and cities. While the price of insulin products has declined, the domestic substitution process has greatly accelerated. With a sound business strategy, reasonable strategic arrangements and strong commercialization capabilities, the company achieved an overall increase in sales of various insulin products, while promoting a continuous increase in the market share of the company's products. The company achieved a sales increase of more than 60% during the reporting period for insulin analogue products.
Operating efficiency continues to improve, and technical service revenue increases profits. The year-on-year decrease in the company's net profit to the mother was due to the company's sale of some shares of Xiamen Tebao Biotechnology Co., Ltd. during the same period last year, leading to an increase in investment income and the formation of a high base. During the reporting period, the company further promoted cost reduction and efficiency, and the sales expense ratio and management expense ratio were further improved to promote continuous improvement in profit levels. At the same time, combined with profit contributions from technical service revenue obtained from Hong Kong Jianyou, the company achieved a relatively high growth rate of the year after deducting non-net profit.
Clinical projects are progressing steadily, and innovative research and development are flourishing. In terms of the diabetes pipeline, the company's englicin raw materials and tablets and liraglutide injections (trade name: Tongboli) have been approved for marketing, complementing existing products. In terms of the innovative drug pipeline for gout, the phase IIa clinical trial of the company's first-class new drug URAT1 inhibitor (THDBH130 tablets) has reached the main end, and the phase I clinical trial of XO/URAT1 inhibitors (THDBH151 tablets) has completed the final case group.
Both the oral small molecule GLP-1 receptor agonist (THDBH110 capsule) and the GLP-1/GIP dual-target receptor agonist (THDBH120 for injection) have completed the first phase I clinical trial enrollment.
Profit Forecasts, Valuations, and Ratings
Based on the increase in the market share of the company's main products and the increase in profitability exceeding expectations, we raised the company's net profit to mother by 20%, 19%, and 18% respectively. The company is expected to achieve net profit of 11.78 (-25%), 13.58 (+15%), and 15.19 (+12%) billion yuan in 2023-2025, respectively, corresponding to current EPS of 0.59 yuan, 0.68 yuan, and 0.76 yuan, respectively, corresponding to current P/E of 16, 14, and 12 times, respectively. Maintain a “buy” rating.
Risk warning
The risk of sales and promotion of new products falling short of expectations, risk of sales renewal and price reduction exceeding expectations, risk of R&D progress falling short of expectations, risk of lifting the ban on restricted shares, and risk of equity pledges.