Incident: The company released its 2023 annual results report. In 2023, it achieved operating income of 1,412 billion yuan, a year-on-year increase of 21.74%, achieved net profit of 116 million yuan, an increase of 39.22% over the previous year, and achieved net profit withheld from non-mother of 122 million yuan, an increase of 123.88% over the previous year. The fourth quarter achieved operating income of 410 million yuan, an increase of 26.79% over the previous year, achieved net profit of 26 million yuan, an increase of 72.29% over the previous year, and realized net profit without deduction of 27 million yuan, reversing the loss from the previous year. Full year results are in line with expectations.
Kailiwei's rapid expansion drives overall revenue and profit growth. Kailey's 2022 contract renewal will expand the scope of reimbursement to pan-genotypes, opening up market space. After the implementation of the results of the national negotiations, Kailliwei's sales were rapidly scaled up. According to the company's semi-annual report, 2023H1 Kailiwei's sales revenue increased more than 2 times over the same period last year. Currently, the competitive pattern for hepatitis C pan-gene therapy is good. Only Gilead, Kain Technology, and Nanjing Shenghe products are on sale. Compared with Gilead, the company differentiates and expands the primary county market according to the distribution characteristics of hepatitis C patients in China. Compared with Nanjing Shenghe, the company's products were launched in 2020 and Nanjing Shenghe products were launched in May 2023. The company has a clear first-mover advantage. At the same time, considering the urgency of the plan to eliminate Hepatitis C by 2030, we continue to be optimistic about the company's Kailiwei sales volume.
Continue to deepen the field of functional treatment of hepatitis B, and look forward to key clinical data on long-term interferon. According to answers from the company's investor Q&A platform, the Phase III clinical trial of Paiyisheng/KW-001 is currently in the trial data compilation stage, and we are looking forward to reading out key clinical data. Currently, the competitive pattern for long-term interferon treatment of hepatitis B is good. Foreign companies have withdrawn from the Chinese market. Currently, there is only one Pegbin product on the market. After KW-001 is launched, it will become the second long-acting interferon product in the domestic market. In addition, the company also stocks a variety of innovative drugs for the treatment of chronic hepatitis B, such as KW-027 (monoclonal antibody), KW-034 (chemical drug), and KW-040 (siRNA). Among them, KW-027 is currently in clinical phase I. In order to plan ahead of schedule, the company announced a fund-raising project to raise no more than 300 million dollars on February 3, of which 270 million will be used for the antibody production base construction project.
The core product Kailiwei continues to sell in volume, and long-term interferon data can be read out immediately, maintaining a “buy” rating. According to the performance report, we lowered our profit forecast. Net profit for 2023-2025 is expected to be 116 million, 171 million, and 233 million (previous forecasts were 139 million, 192 million, and 255 million, respectively), with year-on-year increases of 39.2%, 47.7%, and 35.9%. The current stock price corresponding to 2023-2025 PE is 40/27/20 times, respectively. Using comparable company valuations, the company's 2024 valuation was lower than that of comparable companies. At the same time, considering the core product Kailiwei Dengda, the rapid growth of 2023-2025 performance, and the imminent reading of long-term interferon product data, they are optimistic about the performance of functional hepatitis B treatment after marketing, so they maintain a “buy” rating.
Risk warning: risk of product commercialization falling short of expectations, risk of developing new drugs, risk of price reduction in collection.