Key points of investment
Excellent profitability and excellent operating efficiency, significantly underestimated: 2023H1 revenue was about 1,603 billion yuan (+8.7%), sales revenue CAGR 18%; 2023H1 net profit was about 630 million yuan (+18.4%), operating profit CAGR reached 102% in the past 5 years, the company's gross profit remained above 75%, net interest rate above 30%, and sales expenses rate below 25%; the company paid cash dividends for two consecutive years and completed a 700 million premium repurchase in 2023. Future dividends and repurchases are still the company A long-term strategy.
Ridaxian maintained rapid and steady growth, and IO combined use began a second growth curve: Ridaxian has consumer properties, low price sensitivity for patients, is sold out of the health insurance system at its own expense, and accounts for nearly 80% of out-of-hospital sales. Ridaxian has built strong brand barriers and doctor-patient loyalty. After 5 years of collecting and winning the VBP bid, it is still growing steadily (5-year CAGR 14.3%). Currently, policy noise has been completely eliminated. Ridaxen has the potential to reshape the immunotherapy pattern. Combined use with IO has led to a second growth curve. The US is exploring combined use with mRNA vaccines, and overseas markets are expanding, and it has an extremely long life cycle.
A number of innovative products are gradually being launched, and the world's first oral SERD is expected to become a hot product: Alasitran is the world's first and only approved oral SERD, which is expected to replace fluvirizin and further expand the penetration rate of SERD drugs in HR+ breast cancer. Elasqun is expected to become the first oral SERD to be marketed in China. There are 400,000 new cases of breast cancer every year, and a peak hit product of at least 2 billion dollars. A number of innovative products such as Vaborem (2 billion peak), RRx-001 (1 billion peak), and Travanstar (500 million peak) will be gradually approved for listing from 2024 to 2025.
The world's leading GTP commercialization platform continues to empower product launch: Saisheng Pharmaceutical pioneered the digital+retail GTP (Direct to Patient) model in the industry to open up in-hospital and out-of-hospital markets. GTP began to set up an out-of-hospital market in 2015. Currently, it covers more than 2,000 core hospitals. The GTP platform links doctors, patients, and DTP pharmacies, creating a closed loop of doctor-patient private domain, generating extremely high user stickiness. Currently, there are 200,000 + registered healthcare workers and 250,000+ patient customers, and resources are expected to continue to boost the sales volume of innovative drugs.
Profit forecast and investment rating: We expect to achieve net profit to mother in 2023-2025 of 1,014/11.87/1,375 billion yuan, respectively, and the current market value corresponding to 2023-2025 PE is 7/6/5 times. Using the segmented valuation method, we expect net profit in 2023 to be 1 billion yuan, 10 times PE, and products already on the market will contribute about 10 billion dollars; innovative drug pipelines such as Elasqun and Vaborem will contribute a peak value of about 4.6 billion yuan, giving 2 times PS, and innovative drugs contributing about 10 billion yuan in valuation. The company is worth around RMB 20 billion, which is significantly undervalued. First coverage, giving a “buy” rating.
Risk warning: New drug development falls short of expectations, intensifying competitive landscape, global business risk.