Incident: On March 28, 2024, the company announced that in 2023, it achieved operating income of 3.156 billion yuan, up 14.76% year on year; realized net profit of 1,122 billion yuan, up 31.16% year on year; gross margin was 74.67%, down 0.63 pct year on year, mainly due to increased product revenue and high inflation in Europe, which led to a sharp increase in product costs.
The GTP model drives sales of Ridaxen. In 2023, the company's sales revenue was 2,631 billion yuan, up 21.33% year on year, accounting for 83.37%. This is mainly due to an increase in market demand for Ridaxen during the development of infectious diseases. Revenue from authorized products fell to 146 million yuan, mainly due to the decline in Zetai's performance due to the seventh batch of volume procurement (“VBP”).
Fee rates have all increased. In 2023, the company's sales expense ratio, management expense ratio, and R&D expense ratio were 25.92%, 9.36%, and 6.21%, respectively, up 3.09 pct, 1.17 pct, and 1.70 pct year-on-year.
Sales expenses have increased dramatically, mainly due to the expansion of sales and marketing teams and the increase in sales volume; the increase in R&D expenses is due to progress in the company's major product development projects and expansion of the product development team.
The company is committed to speeding up the product pipeline. Currently, the company has established a product portfolio consisting of 10 drug candidates under development. Of these, 6 are in phase III or late stage overseas and will adopt a rapid marketing strategy in China, and 4 are in the early stages of pre-clinical to phase II clinical trials overseas or in China. Orserdu is the first and only therapy specifically designed to treat patients with ER+, HER2-advanced, or metastatic breast cancer (“mBC”) with ESR1 mutations. The company plans to explore opportunities to pilot Orserdu in Boao and the Greater Bay Area of Hainan in 2024.
Investment suggestions: Ridaxian and other products continue to be released, and R&D pipelines are abundant. The company's revenue is expected to be 37.09, 42.93, and 5,044 billion yuan in 2024-2026, up 17.54%, 15.75%, and 17.49% year on year; net profit to mother is 13.83, 15.90, and 1,874 billion yuan, up 23.23%, 15.02%, and 17.86% year on year; maintaining the “increase” rating.
Risk warning: Risk of sales falling short of expectations; risk of falling short of expectations in R&D and marketing of innovative drugs; risk of brain loss in R&D and sales; risk of price reduction due to policies and regulations; risk of delisting.