Incident: The company announced its 2023 annual report, achieving operating income of 4.213 billion yuan (+15.72%), net profit of 521 million yuan (+27.78%), net profit after deducting non-return to mother of 438 million yuan (+17.10%), and the impact of non-recurring profit and loss on profit of 83.1 million yuan, mainly government subsidies and revenue from disposal subsidiary Huafang Healthcare. On a quarterly basis, Q4 achieved operating income of 1,096 million yuan (+31.86%), net profit to mother of 106 million yuan (+14.05%), and net profit of non-return to mother of 85 million yuan (+0.71%). In 2023, Jianmin Dapeng achieved net profit of 565 million yuan, an increase of 26.26% over the previous year, corresponding to contributing 185 million yuan in profit to the company.
Comment:
OTC business: Achieved revenue of 1,106 billion yuan (+14.85%) in 2023. The leading product, Longmuzhuangbone Granules, maintained steady growth, and Bento capsules (OTC channel) grew rapidly due to a smaller base. The company's OTC products are sold through online and offline pharmacy channels, and rely on brand-driven, online drainage, professional team promotion and promotion activities. In terms of brand building, the company has built a dual brand around “Dragon” and “Jianmin”, refreshed commercials, optimized advertising plans, and carried out extensive advertising in media such as CCTV, TV, provincial TV, iQiyi, Tencent Video, Mango TV, and mass media to effectively connect target consumers and enhance brand power.
Prescription drug business: Achieved revenue of 1,058 billion yuan (+15.43%) in 2023, and sales of products such as spleen health tablets, Qirui stomach relief capsules, and detoxification and muscle relief were good. Qirui Weishu capsules entered the 2022 medical insurance catalogue through negotiations. In 2023, the company accelerated the introduction of this product into provincial markets to increase hospital market coverage. Furthermore, in 2023, atomoxetine hydrochloride oral solution, lacosamide oral solution, and pediatric Zibeixuan Lung Syrup were approved for marketing and are currently being actively prepared for sale. In terms of research and development, in 2023, Niuhuang Pediatric Antipyretic Patch completed phase III clinical research, Tongxiang Granules initiated phase II clinical research, and Citrus Aurantium laxative tablets obtained a drug clinical trial approval notice, and the product layout is expected to be further enriched.
Profit forecast: We expect the company's net profit to be 612 million yuan, 775 million yuan and 953 million yuan respectively, with growth rates of 17.3%, 26.7%, and 22.9% respectively, corresponding to EPS of 3.99 yuan, 5.05 yuan, and 6.21 yuan. The company has strong brand capabilities, and its core business is growing steadily. Strong demand for sports training beef is expected to rise rapidly in volume and price, and Jianmin Dapeng is expected to continue to contribute to investment income. Referring to comparable companies, we gave the company a 2024 17-22X PE, corresponding to a reasonable value range of 67.80-87.74 yuan, maintaining a “superior to the market” rating.
Risk warning: risk of product price reduction, risk of R&D falling short of expectations, risk of slowing sales of core varieties, risk of increased market competition.