The 23-year performance stabilized. Rookies of the eight major innovation platforms drove Shiyao Group to announce 2023 revenue of 31.45 billion yuan (+1.7% yoy, 4q23 +1.9% yoy), net profit to mother of 5.883 billion yuan (-3.6% yoy, year-on-year decline in 4Q23 under a high base), after deducting +2.8% yoy from non-return mother. Looking ahead to 2024, we are optimistic that the company's stock stocks such as EnbiPu will stabilize. With the full-speed admissions of Mingfure/RANKL/irinotecan liposomes, and the launch of new products such as PD-1 and Omarubu, the company's revenue/net profit is expected to accelerate to double digit growth during the year. We expect the company's EPS for 2024-2026 to be $0.57/0.63/0.73, and give the company 18 times PE in 24 years (the same as its Hong Kong stock comparable company Wind) and a target price of HK$11.15 to maintain a “buy” rating.
The proprietary drug business is progressing steadily, and the pharmaceuticals sector, which may have gained a higher market share, maintained steady growth in 2023 (revenue of 25.64 billion yuan, +4.6% yoy), thanks to double-digit revenue growth in neurological drugs/anti-infective lines and a manageable decline in revenue in the oncology sector. Revenue from neurological medication was +12.1% yoy in 23 years, thanks to the increase in the length of use of the two dosage forms of Enbipl+ and the continuous expansion of OTC and retail channels. In addition, Ming Fu Le's cerebral infarction indications were approved for marketing in February. It is expected that after subsequent medical insurance, myocardial infarction indications will be added to create synergy with Enbipu. Due to low VC and caffeine prices in the API sector, revenue fell 9.4% year on year (VC -23.7% yoy, antibiotics +13.9% yoy, functional food -8.9% yoy). We expect prices such as VC/caffeine to gradually stabilize, and there is still room for growth as the leading market share.
The decline in oncology drug revenue in 23 years was limited. We are optimistic about recovering double-digit revenue growth of 6.14 billion yuan (-16.4% yoy) in 2023 due to collection dragging down white purple sales. Looking ahead to 24, we are optimistic that the sector will contribute double-digit revenue growth. Among them, the stock product portion: 1) Although domicol forms an overrated condition for 5 companies, we expect that it will take time to publish the catalogue. Sales are expected to be stable in 2024; 2) Tianjin Yuli regional collection is expected to maintain the double-digit revenue growth in 2024. New product section: 1) Mitoxantrone liposome/glutamitinib/PI3K is optimistic about benefiting medical insurance negotiations to speed up admission and sales; 2) irinotecan liposome/RANKL/omalizumab may continue to be released for 24 years by the high-quality sales team of CSP. In addition, major products such as meloxicacin crystal/paclitaxel instant solution/docetaxel albumin/HER2 ADC are expected to be launched in '25.
GLP-1 plus ADC dual hottrack layout, focusing on innovative varieties entering the harvest period. The company guides 52 new products/indications to be approved in 24-28 years. It is recommended to focus on the following highlights: 1) in the ADC platform, a) HER2 ADC (phase III is at an end); b) EGFR ADC (mid-phase I, estimated 2H24 data readout), optimistic about potential external licensing; c) CLDN18.2 ADC is about to enter registered clinical trials, and Nectin-4 ADC 2H24 still has data to be read ; 2) In the GLP-1 pipeline, TG103 and Simei analogs are expected to be marketed in '26, and there are still varieties such as dual-target/amino/muscle-gaining/oral formulations. 3) mRNA/siRNA pipeline: Pre-clinical blockbusters include rabies, shingles, respiratory syncytial virus, etc. Furthermore, the company is still expected to achieve 2-3 BDs in 24, which will be the icing on the cake for the pipeline.
Risk warning: risk of price reduction for collection, risk related to R&D/BD progress, risk related to commercialization of new products.