Net profit grew rapidly in 4Q23. The annual results were in line with the equity incentive target. The company released the 2023 performance report. In 2023, it achieved operating income/net profit attributable to mother/net profit of 208.12/8.47/ 834 billion yuan, +9.2%/+20.7%/+20.0% year-on-year, successfully completing the equity incentive target. Among them, 4Q23 operating income/ net profit attributable to mothers/ net profit net profit excluding non-attributable net profit of $51.95/1.72/166 million yuan, +7.6%/+36.4%/+32.1% year-on-year. We expect the company's 23-25 EPS to be 2.34/2.81/3.38 yuan. We expect EPS of 0.80 yuan for the industrial business in '24. Considering that the net interest rate at the beginning of industrial development is still low, we will give 15x PE (EPS 1.51 yuan for the 24-year comparable company); 9x PE (24-year comparable company Wind, consistent forecast 9x); and EPS 0.50 yuan for retail and other businesses. Considering that the company's stores are concentrated in Guangxi, we will give 9x PE (24-year comparable company Wind consistent expectation 12x), corresponding The target price is 30.11 yuan, maintaining the “buy” rating.
Industrial net profit performance in 23 years was impressive, accelerating the transition between old and new industrial revenue/net profit of the company in 23 years, +39.7%/+55.6%: 1) Xianju Traditional Chinese Medicine: the production capacity and sales scale of traditional Chinese medicine tablets continued to increase, further expanding the market outside the province; 2) Formulated granules: More than 450 varieties have been registered, and customer development continues to accelerate. We expect volume to begin in 24; 3) Wantong and Kang Sheng: The company established a proprietary Chinese medicine marketing center, which is expected to grow rapidly 24 years after the sales reform. We expect the revenue of the Chinese medicine industry to be 15.6/2.02 billion yuan in 24-25, an increase of 40%/30% year on year, and the net profit from the industry to mother will contribute 29/380 million yuan, an increase of 40%/32% year on year.
The profit of the wholesale business grew steadily in '23, and the profitability of the retail business continued to improve the company's wholesale revenue/net profit of RMB 16.788/489 million yuan in '23, +9.6%/+9.5% year-on-year. We expect the wholesale business to generate revenue of 184/20.4 billion yuan in 24-25 years, +10%/+10% year-on-year; net profit to mother of 55/ 630,000 yuan, +12%/+15% year-on-year. The company's retail revenue/net profit to mother in '23 was 28.22/147 million yuan, -1.8%/+20.8% year-on-year. Through measures such as optimizing product structure and strengthening operating cost control, the company's net retail profit grew rapidly year-on-year. We expect retail and other businesses to generate revenue of 35.1/4 billion yuan in 24-25 years, an increase of 21%/17% year on year; net profit to mother of 188 to 220 million yuan, an increase of 22%/20% year on year.
Steady growth in performance, maintaining a “buy” rating
We expect net profit of 8.47/10.18/1,225 million yuan in 2023-2025, +20.7%/+20.3% YoY. The current stock price corresponds to PE 9x/8x/6x, adjust the target price to 30.11 yuan (previous value 25.32 yuan), and maintain the “buy” rating.
Risk warning: The impact of the external environment exceeded expectations; the growth of industrial revenue and net profit fell short of expectations.