Incidents:
On March 22, 2023, the company released its 2023 annual report: in 2023, the company achieved revenue of 7.703 billion yuan (yoy -6.99%), net profit to mother of 445 million yuan (yoy +16.05%), after deducting non-return net profit of 335 million yuan (yoy +33.45%).
Investment highlights:
The company's net profit without return to mother in 2023 hit a five-year high. In 2023, the company achieved revenue of 7.703 billion yuan (yoy -6.99%), net profit attributable to mother of 445 million yuan (yoy +16.05%), after deducting net profit of 335 million yuan (yoy +33.45%). Net profit after deducting non-return to mother hit a new high since 2019. In 2023, Q4 achieved revenue of 2,092 billion yuan (yoy +0.14%), net profit attributable to mother of 59 million yuan (yoy +458.75%), and net profit of 25 million yuan after deducting non-return to mother (-190 million yuan in the same period last year).
Core products have maintained good growth, and commercial and other businesses have declined. In 2023, the company's revenue from injection products was 1,059 million yuan (yoy +11.09%), of which injectable hemosideron (freeze-dried) increased by 22.65% year-on-year. In 2023, the company's oral formulation revenue was 3,055 billion yuan (yoy +5.58%). Among them, Hesetong softgels increased 33.04% year on year, Hesetong tablets increased 15.09% year on year, and Shugan Shugan tablets increased 11.11% year on year. In 2023, the company's pharmaceutical business revenue was 3.322 billion yuan, down 7.40% year on year; other business revenue was 105 million yuan, down 63.39% year on year.
Continuous integration has improved the quality of operations. On January 19, 2023, the company successfully completed the restructuring of the board of directors and board of supervisors, and the controlling shareholder of the company was changed to China Resources 39. In 2023, the company will continue to promote 100-day integration and one-year integration with China Resources 39, and solidly implement the “Four Reshapings” (value/business/organization/spiritual reshaping). Both the company's administrative expenses and financial expenses in 2023 hit new lows since 2018.
The company issued a strategic plan (2024-2028) to clarify the 2028 performance development goals. The company issued a strategic plan (2024-2028), which clarifies the corporate mission and corporate vision. The company's strategy is closely centered around “inheriting quality Chinese medicines, with the 37 industrial chain as the core, based on aging health, expanding the field of chronic disease management, and becoming the number one stock in the silver hair health industry”.
The company aims to double operating income and reach 10 billion yuan in industrial revenue by the end of 2028 through endogenous development and epitaxial expansion.
Profit forecast and investment rating We expect revenue for 2024/2025/2026 to be 8.578 billion yuan/9.579 billion yuan/10.749 billion yuan, corresponding to net profit attributable to mother of 587 million yuan/764 million yuan/958 million yuan, and corresponding PE of 27.76X/21.32X/17.02X. We have lowered our 2024-2025 performance expectations based on actual results achieved in 2023. We believe that the excellent quality of the company, empowered by China Resources 39 in many ways after becoming the controlling shareholder, is expected to drive continuous improvement in the company's operations. Maintain a “buy” rating.
Risks suggest that business management integration is progressing less than expected; sales volume of major products falls short of expectations; injections are affected by collection; the company's strategic plan does not promise performance or meet expectations; and progress in building new brands is slower than expected.