2023 results beat our expectations
The company announced its 2023 results: revenue of 10.10 billion yuan, up 7.7% year on year; net profit to mother of 3.28 billion yuan, up 26.9% year on year, higher than our expectations, mainly due to down payment accounts authorized by the product.
Development trends
The share of innovative drugs continues to rise, and early pipeline global cooperation is being effectively promoted. In '23, the company's revenue for innovative drugs and cooperative products increased to 67.9% (+14.5pct YoY), of which revenue from cooperative products was 70 billion yuan, mainly down payment accounts authorized by B7H4 ADC to GSK. The company expects that the down payment of about 1.3 billion yuan authorized by another B7H3 ADC to GSK will be recorded in '24. By sector: 1) Anti-cancer business revenue of 6.17 billion yuan (+11.7% YoY). Amelot doubled its volume after being included in health insurance in March 2023. We expect sales to increase by about 12% year-on-year in 2023 and nearly 20% year-on-year increase in 24; 2) Anti-infective business revenue of 1.27 billion yuan (+1.6% YoY) in 23 years, central nervous system business revenue of 1.37 billion yuan (-8.5% YoY), and other businesses revenue of 1.37 billion yuan (+16.3% YoY) in 23 YoY). In 2023, the company reached a number of commercial partnerships, including the external licensing of GSK, the introduction of Deqi Pharmaceutical Celinisole, and the expansion of EGFRxCMET dual-antibody cooperation with Pumis in March '24.
Profitability is generally stable, and cash reserves are abundant. The company's net profit margin for 2023 was 32.4% (+4.9pctyoy), of which the gross profit margin was 89.8% (-1.0pct yoy); the sales expense ratio declined due to increased efficiency, and the R&D expense ratio increased slightly due to many early clinical advances. By the end of 2023, the company's book monetary reserves exceeded RMB 22 billion, which is a strong guarantee for the company's investment in R&D and BD.
Focus on the further release of innovative drugs in 2024 and the readout of early clinical pipeline data. The company's 7 innovative drugs approved in '23 have all been included in the national health insurance catalogue, and the company expects innovative drugs to account for more than 70% of revenue in '24. We believe that after maintaining the current commercialization team for 24 years, the company is expected to continue to improve per capita efficiency. The company has a rich pipeline of innovative drugs to support continued revenue growth in the future. The company expects the number of follow-up cases to be reached in 1H24 for the adjuvant treatment of NSCLC by Amirac, and the marketing application is expected to be submitted in 2H24. The company is also deeply involved in the ADC field, including the use of Pumis' EGFRxCMet dual antibody for ADC development. At the same time, central nervous system and metabolic pipeline products are being actively promoted, and it is recommended to focus on reading clinical data.
Profit forecasting and valuation
Since the cooperative down payment accounting section will be confirmed in 2024 and we expect the company's three fees to be well controlled, we raised our 24-year revenue and net profit forecast 2.0%/11.0% to RMB 11.566/ 3.43 billion yuan, and introduced a 25-year profit forecast of 3.56 billion yuan for the first time. Maintaining an outperforming industry rating, according to the SOTP method, we raised our target price by 27.2% to HK$17.81 as innovative drugs in the company pipeline entered the harvest period, corresponding to 27/26 times the price-earnings ratio in 2024/25 (19.7% upward space).
risks
Product commercialization falls short of expectations; competitive landscape intensifies; clinical data falls short of expectations.