Incidents:

The company released its 2023 annual report. It achieved revenue of 41.40 billion yuan for the whole year, a year-on-year decrease of 5.81%, realized net profit of 2.386 billion yuan, a year-on-year decrease of 36.04%, and realized net profit without deduction of 2,011 billion yuan, a year-on-year decrease of 48.08%. The performance was in line with expectations.

The transient impact of products such as Fubitai was rapidly growing. Looking at the rapid growth of new products and sub-new products, the company's pharmaceutical business achieved revenue of 30.222 billion yuan (-1.91% year over year), and the pharmaceutical business without COVID-19 products increased 13.50% year on year, mainly due to rapid growth of new and sub-new products (Hans, Han Quyou, Su Kexin, etc.); the medical device and diagnostic business achieved revenue of 4.39 billion yuan (-36.83% year over year). Revenue of the same caliber without COVID-19 products increased by 3.92% year on year, and the medical service business achieved revenue growth of 6.672 100 million, an increase of 9.74% over the previous year, and the revenue of hospitals such as Chancheng increased.

Optimistic about the company's multiple line improvements in 2024

The company's newly launched drugs in 2023 include Yicintan, Panbifu, Beiwen, Pejin, etc., and the latter 2 drugs were negotiated into medical insurance. Yikaida added second-line indications, and Hans was accepted; in the device and diagnostic business, registration applications for long-acting botulinum toxin Daxxify and sodium hyaluronate Profhilo were accepted, and medical and aesthetic products are expected to increase. The DaVinci surgical robot is expected to be installed 55 units domestically in 2023. We expect subsequent installations to accelerate in 2023; due to online business focus and optimized expenses, the profit division will be the same Compared to loss reduction, we expect this business's loss to narrow further.

Profit Forecasts, Valuations, and Ratings

Due to the impact of COVID-related business, we have adjusted our forecast. The company's revenue for 2024-2026 is 435.85/474.25/51,51.75 billion, respectively, with year-on-year growth rates of 5.28%/8.81%/8.75%, and net profit to mother of 38.52/44.25/ 5.017 billion, respectively. The year-on-year growth rates are 61.43%/14.87%/13.39%, EPS is 1.44/1.66/1.88 yuan/share, respectively, and the 3-year CAGR is 28.11%. Given that the company's pharmaceutical, medical service, and device businesses all improved in 2024, with reference to comparable company valuations, we gave the company 23 times PE in 2024, with a target price of 33.16 yuan, maintaining the “gain” rating.

Risk warning: Innovative drug sales fall short of expectations; medical service losses fall short of expectations