The performance of APIs and functional foods remains steady, and innovative assets may continue to integrate the company within 24 years to achieve revenue of 2.5 billion yuan (-4.8% yoy), net profit to mother of 760 million yuan (+4.0% yoy), net profit of 760 million yuan (+13.1% yoy) after deducting net profit of non-return mother. The company's revenue declined slightly and profits maintained steady growth, mainly due to caffeine prices under pressure during 23 years, but the cost and price of raw materials fell even more, driving the optimization of product gross margin (+2.65 pct year-on-year gross margin for the functional ingredients sector in '23). Looking ahead to 2024, considering the excellent competitive pattern of caffeine/acarbose raw materials and stable prices, combined with stable demand from Guoweikang, we are optimistic that the net profit of the company's endogenous business will increase by more than 10% year-on-year. We expect the company's 2024/2025/2026 EPS to be 0.71/0.80/0.88 yuan (not taking into account the Jushi Biology/Shiyao 100g balance sheet), giving the company 65 times PE in 24 years (considering the company's leading attributes and innovative drug layout in hot fields such as mRNA/GLP-1/ADC, a 54 times premium compared to the company's 24-year wind consensus forecast), with a target price of 46.15 yuan to maintain “purchase”.
Endogenous business: Profits grew steadily in 23 years, and the company was optimistic that caffeine prices stabilized in '23. The company's API and health food business achieved revenue of 2.13 billion yuan (-5.0/ -2.6% yoy) respectively, mainly due to fluctuations in caffeine prices and changes in the factory price of health products during the year. We are optimistic that the company's endogenous business will achieve steady growth in 2024, benefiting from the company's cost reduction and efficiency, and net profit growth faster. Consider: 1) Functional ingredients sector: We believe that the caffeine market price is already low, compounded by the steady increase in the company's production, and we are optimistic that positive growth will resume in 24 years. In addition, Shiyao Shengxue achieved a net profit of 93.49 million yuan within 23 years (performance commitment completion rate of 102.73%). We are optimistic that rigid demand for acarbose terminals plus rising new production capacity will drive its revenue to stabilize in 24 years. 2) Functional food: We are optimistic that the company's product matrix+online/offline channels will work together to drive continuous revenue growth in the 24-year sector.
Dushi Biotech: A scarce domestic mRNA+ADC technology platform, starting the first step of innovation and transformation. We expect Jushi Biotech to be officially merged in 2024. Jushi Biotech's core pipeline covers: 1) mRNA platform: a leading domestic platform with commercialized products, followed by varieties with broad market space such as rabies, RSV, and HPV therapeutics. 2) ADC platform: HER2 ADC is expected to be launched in the second tier of domestic production. Nectin4/Claudin18.2 was successfully authorized overseas. EGFR ADC is optimistic about overseas BD potential. Since then, we are optimistic about 2-3 new IND varieties every year. 3) Monoclonal antibody platform: PD-1/omalizumab will be commercialized in 24, which is expected to drive the company's innovative drug revenue growth in the future.
Shiyao Baike: Major asset restructuring is underway. We are optimistic about leading GLP-1 assets+Brightener's deepening transformation company, which previously announced that it plans to acquire 100% of the shares of Shiyao Group Baike Biotech by issuing shares and cash. Specific information about Baike Biotech: 1) Core assets: Jin Youli+ Shiyao Group's GLP-1 R&D pipeline; 2) 2023 revenue/profit of 26.6/860 million yuan respectively (estimated that Jin Youli is the main contributor); 3) GLP-1 pipeline progress: a) TG103 (in phase III of weight loss/sugar reduction), which we expect to be marketed in 26 years; b) Simeglopeptide-like drugs; c) In addition, the early pipeline laid out products such as double target, triple target, and oral administration.
Risk warning: Caffeine price fluctuation risk, innovative drug pipeline development risk, risk associated with commercialization of innovative drugs, injection of innovative assets falling short of expectations.