Incident: The company released its 2023 annual report. In 2023, it achieved total operating revenue of 7.7 billion yuan, a year-on-year decrease of -6.99%; net profit to mother was 4.4 billion yuan, an increase of 16.1%; net profit after deducting non-return to mother was 330 million yuan, an increase of 33.5% year on year.
Blood Saetong continues to grow, and innovative research and development is progressing steadily. In January 2023, Kunyao Group officially became a member company under China Resources 39. The 100-day integration and one-year integration progressed smoothly, striving to set the 37 benchmark. In 2023, the company's financial expenses decreased by 73.2% year on year, management expenses decreased by 17.3%, gross margin remained at 45.41%, up 1.31% year on year, mainly due to the continuous optimization of KPC's product structure, multiple measures to promote cost reduction and efficiency, and overall operation stability. In 2023, the company's Hesketong oral series products increased 19.44% year on year, with sales of Hesketong softgels up 33.04% year on year and 15.09% year on year; the company's injections increased 11.09% year on year, of which injectable Hesetong (freeze-dried) increased 22.65% year on year. With the further opening up of the company's out-of-hospital market, Hesketong is expected to expand further. In 2023, the company invested a total of 130 million yuan in R&D, R&D expenses increased 2.3% year on year, and the company made great progress in R&D innovation. The self-developed clinical phase II trial of KYAZ01- 2011-020, a class 1 drug suitable for ischemic stroke, is progressing in an orderly manner, and enrollment is progressing smoothly.
The clinical phase I climbing phase study of KYAH01—2016-079, a class 1 innovative drug suitable for isocitrate dehydrogenase-1 (IDH1) gene mutation, has completed enrollment in 3 dose groups.
High-quality Chinese medicine platform, “Kunming Traditional Chinese Medicine” is growing steadily. The company fully explores the brand value and historical and cultural value of the “Kunming Traditional Chinese Medicine 1381” brand. Relying on China Resources 39's terminal operation and management capabilities, brand operation capabilities and strategic planning capabilities, the company focuses on building strong single products around “big variety - big brand - big category”. In 2023, Kunming Traditional Chinese Medicine achieved 950 million yuan and profit reached 140 million yuan. While stabilizing in-hospital sales, Shu Gan tablets, the core product of Kun's traditional Chinese medicine, accelerated the layout of out-of-hospital channels and achieved 11.11% growth; high incidence of respiratory diseases such as influenza and mycoplasma pneumonia increased demand for terminal drugs, and products such as oropharyngeal cleansing pills and lung clearing phlegm pills continued to gain strength in the potential product group of Kunming. Oropharyngeal cleansing pills increased 44.32% year on year, and Panlan clean-up granules increased 21.19% year on year.
The company announced a five-year plan, and the industry can expect 10 billion dollars in revenue. In the future, the company will continue to be a “leader in the Yinfa Health Industry”, closely revolving around “inheriting fine Chinese medicines, with the 37 industrial chain as the core, based on aging health, expanding the field of chronic disease management, and becoming the first stock in the Yinfa Health Industry”. Through endogenous development and epitaxial expansion, the company will strive to double its revenue and reach 10 billion yuan in industrial revenue by the end of 2028.
Profit forecast and investment suggestions: Considering the strong competitiveness of the company's Huesaitong+Kun Traditional Chinese Medicine brands, it is expected that the company's brand advantages will be better exploited after connecting to China Resources channels for sales, and the company's main business will grow steadily. The estimated profit for 2024-2026 is 600 million yuan, 760 million yuan, and 930 million yuan, respectively, corresponding to PE of 27 times, 21 times, and 17 times. It is recommended to keep an eye on it.
Risk warning: Risks such as cost control falling short of expectations, falling short of expectations in the development and promotion of new drugs, and obvious increases in the cost of Chinese herbal medicines.