2023 results are in line with our expectations
The company announced full-year results for 2023: revenue of RMB 31.45 billion, +1.7% YoY; net profit to mother of RMB 5.87 billion, -3.6% YoY; net profit of 6.28 billion yuan, +2.8% YoY. Both revenue and profit were in line with our expectations.
Development trends
All business lines were stable in 2023, and management guided double-digit revenue and profit growth in 2024.
Looking at the full year of 2023 by sector: in the proprietary drug business, neurological revenue +12% year-on-year, with Enbip's double-digit increase; anti-tumor revenue was -16%, mainly due to the year-on-year decline of about 70% due to the collection performed by Kerry. Domectin remained flat (the company said that high-end complex preparations will not necessarily be collected soon, and even the impact of collection may be manageable), Jin Youli's double-digit growth; anti-infective revenue +20%; cardiovascular revenue is -16% year over year, mainly due to Xunning and Encun's decline. Management expects Xuanning to continue to grow in retail., there will still be 1 billion yuan in 2024 The above income; respiratory income +124% year-on-year; digestive metabolic income +18% year-on-year. In the raw materials product business, vitamin C revenue was -24% year over year, mainly due to continued price weakness. The company said that prices have rebounded since this year; antibiotic revenue +14%; functional food and other revenue -9% year-on-year, mainly due to the decline in caffeine prices. The company said its production capacity and share continued to increase. Management indicates that revenue and profit can achieve double-digit growth in 2024, and new/sub-new products can contribute about 3.5 billion yuan in revenue on the reporting side, including 5-6 billion yuan of ilitecam liposomes. The company also stated that it will continue to maintain a dividend ratio of more than 30% in the future.
Innovative research and development continues to advance. In January 2024, the company announced that it will inject the subsidiary Shiyao Baike, which focuses on GLP-1 and other products, into the A-share listed subsidiary Xinnovo (CSPC Innovation Group). The company expects significant progress by the end of 2024. In terms of research and pipeline, since 2023, COVID-19 mRNA vaccines, RANKL monoclonal antibodies, iritecan liposomes, and TNK activators (indications for acute stroke) have been approved for marketing. By the end of 2023, the company had more than 60 products in clinical trials or application stages, and 7 had submitted marketing applications. The company expects PD-1 (the first indication is cervical cancer), omalizumab, etc. to be approved for marketing by the China Drug Administration within 2024; iritecan liposomes and amphotericin B liposomes will be approved for listing in the US within 2024 (the company said it will be sold overseas first through a proxy model); Claudin18.2 ADC will soon enter registered clinical trials; Nectin-4 ADC and EGFR ADC are expected to read clinical data in 2H24. The company also expects to submit about 4 clinical trial applications for new GLP-1 products (oral, long-acting, multi-target, etc.) within 2024.
Profit forecasting and valuation
We keep our 2024 profit forecast unchanged. For the first time, we introduced a core net profit forecast of 7.93 billion yuan for 2025. The current stock price corresponds to 10/8 times the 2024/25 price-earnings ratio. We maintain our outperforming industry rating and target price of HK$9.3, corresponding to the 2024/25 price-earnings ratio of 13/11 times, with a 45% upward margin from the current stock price.
risks
Prices of collection have been reduced beyond expectations, R&D has failed, the competitive landscape has deteriorated, and internationalization has fallen short of expectations.