Brief performance review
On March 19, 2024, the company released its 2023 annual report. In 2023, the company achieved operating income of 14.566 billion yuan, an increase of 15.35% over the previous year; achieved net profit of 4.532 billion yuan, an increase of 9.47% over the previous year; realized net profit of 4.516 billion yuan without return to mother, an increase of 9.63% over the previous year. On a quarterly basis, the fourth quarter of 2023 achieved revenue of 3.884 billion yuan, a year-on-year increase of 30.30%; realized net profit of 920 million yuan, an increase of 36.20% over the previous year; realized net profit without deduction of 899 million yuan, an increase of 30.72% over the previous year.
Management analysis
The core business progressed steadily, and all sectors achieved steady growth. The company and its subsidiaries are operating steadily, and the revenue and net profit of core pharmaceutical companies have increased. Among them, the subsidiary Jinsai Pharmaceutical achieved revenue of 11.084 billion yuan (+8%), achieving net profit of 4.514 billion yuan (+7%); the subsidiary Baike Biotech achieved revenue of 1,825 million yuan (+70%), achieving net profit of 501 million yuan (+176%); the subsidiary Huakang Pharmaceutical achieved revenue of 703 million yuan (+7%), achieving net profit of 37 million yuan (+18%); the subsidiary Gaoxin Real Estate achieved revenue of 915 million yuan (+14%); realized net profit to mother of 74 million yuan (+16%).
The research and development bureau continues to be improved and innovation-driven. The company continues to establish and improve the R&D management system to comprehensively improve quality and efficiency. The subsidiary Jinsai Pharmaceutical began construction of the global science and technology innovation headquarters and R&D center in Shanghai's Zhangjiang International Medical Park; Jinsai Pharmaceutical's innovative software medical device national headquarters and industrial cluster (Jinsai Star, a medical device company under Jinsai Pharmaceutical) settled in Chongqing Science City, and the first phase of the production line was officially put into production. By the end of the reporting period, the company had 1,329 relevant R&D personnel, including 198 PhDs.
A number of products under development have entered the advanced clinical stage and are expected to contribute to increased performance. The company's long-term growth hormone-related indications such as idiopathic short stature (ISS) and growth disorders in children due to congenital ovarian hypoplasia syndrome (Turner syndrome) have entered the marketing review stage; adult growth hormone deficiency indications have begun phase III clinical trials, and patients are being enrolled. Kinnalizumab has completed the main phase III clinical study in acute gout arthritis. The enrollment of patients in phase III clinical trials associated with advanced gastric or gastroesophageal adenocarcinoma for advanced gastric or gastroesophageal junction adenocarcinoma continues to advance. If the key products under development are successfully approved for the market, it is expected that they will continue to contribute to the company's performance growth.
Profit Forecasts, Valuations, and Ratings
The company's leading position in growth hormone is stable, and the long-term growth logic remains unchanged. We expect the company to achieve net profit of 51.2 (+13%), 57.3 (+12%), 6.32 billion yuan (+10%) in 2024-2026, and EPS of 12.65, 14.16, and 15.62 yuan, respectively, corresponding to the current P/E of 10, 9, and 8 times, respectively. Maintain a “buy” rating.
Risk warning
Health insurance price reduction and cost control risks; growth hormone competition increases risks; product sales fall short of expectations; R&D progress falls short of expectations, etc.