Haohai Biotech released its 2023 annual report. The company achieved revenue of 2,654 billion yuan (YoY +24.59%); net profit of 416 million yuan (YoY +130.58%); net profit after deduction of 383 million yuan (YoY +141.52%). By quarter: 2023Q4 achieved operating income of 672 million yuan (+22.74% year over year); realized net profit of 89 million yuan (+377.12% year over year); realized net profit of 79 million yuan after deduction (+330.78% year over year).
Opinion: The overall volume of hyaluronic acid is driving rapid growth in the medical and aesthetic sector, and the increase in the share of high-end hyaluronic acid revenue is driving up overall gross margin. The number of cataract surgeries recovered after the epidemic to promote intraocular lens release. The research pipeline is rich in reserves, laying a solid foundation for continued growth in performance.
The amount of high-end hyaluronic acid led to an increase in gross margin, and multiple factors drove a sharp increase on the profit side. The company's operations are steady, and revenue growth is in line with expectations. The share of revenue from high-margin hyaluronic acid products increased, driving the overall gross margin to 70.46% (+1.51 pct year over year). The profit increase far exceeded the revenue side, which is related to the low base in 2022:1) the US subsidiary Aaren accrued impairment losses of 46.07 million yuan; 2) production and operation of companies in Shanghai stagnated from March to May 2022, leading to a loss of about 37.35 million yuan from work stoppages in that year.
The total volume of hyaluronic acid products has doubled, and high-end “Sea Charm” has doubled. 1) The medical aesthetic and wound care business revenue was $1,057 million (+41.27% YoY), of which hyaluronic acid revenue was $602 million (YoY +95.54%); human epidermal growth factor of 171 million yuan (YoY +13.58%); and radiofrequency and laser equipment of $284 million (-1.97% YoY).
2) Hyaluronic acid products were sold across the board, and sales increased by 87.71% year-on-year. The high-end hyaluronic acid “Sea Charm” earned 230 million yuan (+129.32% year over year), and the market penetration rate continued to increase; “Haiwei” and “Jiaolan” also achieved growth of 94.14% and 57.70% respectively.
Artificial crystal products are selected from all countries, and SBL-3 is a powerful driver of revenue growth. 1) Ophthalmology business revenue of 928 million yuan (+20.57% year over year), of which cataract business revenue was 497 million yuan (+35.07% year over year); myopia prevention, control and refractive correction business revenue was 401 million yuan (+5.82% year over year); and revenue from other ophthalmology products was 30.34 million yuan (+31.46% year over year). 2) Intraocular lens revenue was 382 million yuan (+37% year over year). Sales of products produced by Henan Cosmos and Lenstec products from Zhenxin Industrial Agent increased significantly. Sales of the high-end product SBL-3 increased 69.37% year on year, mainly due to the steady recovery of cataract surgeries, and the price system for the company's intraocular lens products remained stable.
In November 2023, the company's intraocular crystal products were fully selected in China, and it is expected that the market share will increase further in price in exchange for volume.
Product development is progressing in an orderly manner. As of the end of 2023, the company had 7 ophthalmology, 7 medical aesthetics, 5 orthopedic and other ongoing research projects. In the medical and aesthetic field, fourth-generation organic crosslinked hyaluronic acid is in the late stages of registration and is expected to contribute a new growth point. In the field of ophthalmology, hydrophobic models are injecting aspheric intraocular lenses to correct astigmatism, and biogels for innovative intraocular fillers have entered the registration process, and the R&D pipeline is progressing smoothly.
Profit forecasting and investment advice. We expect the company's revenue in 2024-2026 to be 32.06 billion yuan, 38.47 billion yuan, and 4.540 billion yuan, respectively; net profit to mother will be 5.36, 6.44, and 763 million yuan, respectively, up 28.9%, 20.2%, and 18.5% year on year; corresponding PE will be 35X, 29X, and 25X, respectively, maintaining a “buy” rating.
Risk warning: Sales and promotion of new products fall short of expectations; increased risk of market competition; risk of industry policy changes, etc.