Incident: The company released its 2023 annual report, achieving operating income of 14.57 billion yuan, an increase of 15.4% year on year; realized net profit attributable to shareholders of the parent company of 4.53 billion yuan, an increase of 9.5% year on year; realized net profit of 4.52 billion yuan after deduction, an increase of 9.6% year on year.
Growth hormone is growing steadily, and the share of revenue from non-pediatric products has increased. In '23, the subsidiary Jinsai Pharmaceutical achieved revenue of 11.08 billion yuan (+8.5%) and achieved net profit of 4.51 billion yuan (+7%) to mother. Jinsai's pediatric business is growing steadily. Growth hormone-related dosage forms respond positively to local procurement, and the share of revenue for long-acting dosage forms continues to rise. The new business strategy is more clear and focused. The revenue of products related to non-core pediatric businesses, such as comprehensive pediatric medicine, women's health, adult endocrinology, and dermatology, accounts for nearly 10% of Jinsai Pharmaceutical's overall revenue.
The dose of the shingles vaccine is expected. Baike Biotech achieved operating income of 1.83 billion yuan (+70.3%) and net profit of 500 million yuan (+176%) to mother. According to the company's latest investor relations activity record, the shingles vaccine has been approved in 30 provinces, autonomous regions, and municipalities across the country. By the end of 2023, the company's shingles vaccine had effectively covered nearly one-third of the country's vaccination sites, and is expected to continue to increase in 2024. In terms of profitability, the company's gross margin in 2023 was 90.2% (+3pp), mainly due to the high gross margin of the herpes zoster vaccine and an increase in sales share. The sales expense ratio is 35.5% (-2.95pp), the management expense ratio is 8.7% (-4.75pp), and the R&D expense ratio is 10.9% (-1.6pp). The company's net interest rate for 23 years was 27.5% (+10.5pp), mainly due to the company's release of new products, and the scale effect was evident.
The real estate and proprietary Chinese medicine business remained stable, increasing the dividend ratio to 3.1% for 23 years, demonstrating confidence in long-term development. Hi-Tech Real Estate achieved operating income of 920 million yuan (+13.7%) and realized net profit of 74 million yuan (+16.3%) to mother. Huakang Pharmaceutical achieved operating revenue of 700 million yuan (+6.7%) and net profit of 37 million yuan (+18.5%). The operation has remained generally stable. The company announced the “Shareholder Return Plan for the Next Three Years (2023-2025)” on January 13. Under the conditions of cash dividends, the profit distributed by the company in cash every year is not less than 40% of the distributable profit achieved in that year. Also, it was announced on January 20 that the total capital the company plans to use for repurchase is not less than RMB 100 million (inclusive) and no more than RMB 120 million. Based on the total capital to be used for the repurchase and the maximum repurchase price, the estimated number of shares to be repurchased is about 625,000 shares, accounting for about 0.15% of the company's total share capital. We believe that the above measures are conducive to positive returns to investors, guide investors to establish the concept of long-term investment and rational investment, and establish a continuous, stable and scientific return mechanism for investors.
Profit forecasting and investment advice. EPS is expected to be 12.59 yuan, 13.85 yuan, and 15.06 yuan respectively in 2024-2026. Maintain a “buy” rating.
Risk warning: There is a risk that product sales will decline, and the R&D progress will fall short of expectations.