Key points of investment:
Incident: Changchun Hi-Tech released its 2023 performance report. In 2023, the company achieved revenue of 14.566 billion yuan (YoY +15.35%), achieved net profit of 4.532 billion yuan (YoY +9.47%), and achieved operating income of 3.884 billion yuan (YoY +30.30%) in the fourth quarter, achieving net profit of 920 million yuan (YoY +36.12%). Revenue exceeded expectations, and profits fell short of previous expectations due to the company's increased investment in R&D. The company announced the 2023 dividend plan, which will distribute RMB 45 (tax included) for every 10 shares, for a total of 1.8 billion yuan in dividends.
Jinsai Pharmaceutical is growing steadily, and the vaccine sector is rapidly expanding. By sector, in 2023, Jinsai Pharmaceutical achieved revenue of 11.084 billion yuan (+8.48% YoY), and achieved net profit of 4.514 billion yuan (YoY +7.04%). The non-pediatric sector already accounted for nearly 10% of revenue. In a single quarter, Jinsai Pharmaceutical achieved revenue of 2,966 million yuan (+24% YoY), achieving net profit of 990 million yuan (YoY +33.4%). Jinsai Pharmaceutical performed well in the fourth quarter. The subsidiary Baike Biotech achieved revenue of 1,825 million yuan (+70.30% YoY) and achieved net profit of 501 million yuan (+175.98% YoY). After the shingles vaccine was launched, it became a new profit growth point for the company. (The above data are all from the company's annual report)? Vigorously lay out the non-growth hormone sector and gradually enter the harvest period. After experiencing rapid growth in the growth hormone sector, it has now entered a stage of steady growth. Jinsai Pharmaceuticals' non-growth hormone segment and Baijiao Miao business have gradually become new growth points for the company.
In recent years, the company has vigorously deployed new products. In addition to continuing to be deeply involved in the field of children's and women's health, it is also actively developing business segments such as adult endocrinology, dermatology, and oncology. In 2023, Changchun Hi-Tech invested 2,419 billion yuan in R&D (the vast majority was Jinsai R&D investment), an increase of 45.46% over the previous year. According to the company's annual report, several new products in the pipeline have entered production and phase III clinical stages, including triprorelin microspheres (once a month, pre-NDA), water-soluble progesterone (production report), leuprorelin (once every 6 months, phase III), long-acting follicle-stimulating hormone (phase III), quinalizumab (phase III), and kinazumab (phase III). At the same time, many products are in the pre-clinical, phase I clinical, and phase II clinical stages.
Maintaining the “buy” rating: Considering that the company will continue to increase investment in the non-growth hormone sector in the future, we lowered our profit forecasts for 2024 and 2025. We expect the company's net profit to be 5.132 billion (+13.2% YoY) and 5.658 billion (YoY +10.2%), respectively. Previously, net profit to the mother for 2024 and 2025 was 5.649 billion and 6.671 billion, respectively. Additional profit forecast for 2026 is estimated to be 6.241 billion yuan (same as Compared to +10.3%), the current market value (closing market value on March 20) corresponds to 2024-2026 PE 10X, 9X, and 8X, respectively. Using the PE relative valuation method for valuation, we selected three companies, Colon Pharmaceuticals, and Tonghua Dongbao, as comparable companies. The three companies all entered a stage of steady growth and vigorously laid out innovative drug pipelines. The average PE of the 3 companies in 24 years was 16 times. Compared with 10 times the company's PE in 24, the company's market value increased by more than 20%, maintaining a “buy” rating.
Risk warning: competition increases risk, risk of sales falling short of expectations, risk of reducing the price of growth hormone water/powder needle collection.