Incident review
On March 28, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 3,075 billion yuan, an increase of 11% over the previous year; realized net profit of 1,168 billion yuan, a decrease of 26% over the previous year; and realized net profit of 1,168 billion yuan without return to mother, an increase of 39% over the previous year. Looking at a single quarter, in the fourth quarter of 2023, the company achieved revenue of 984 million yuan, a year-on-year increase of 45%; realized net profit of 408 million yuan, an increase of 128% over the previous year; realized net profit without deduction of 411 million yuan, an increase of 128% over the previous year.
Management analysis
Insulin sales increased across the board, and the domestic substitution process accelerated. Since May 2022, national special insulin collection has been launched in various provinces and cities. While the price of insulin products has declined, the domestic substitution process has greatly accelerated. With its sound business strategy, reasonable strategic arrangement and strong commercialization capabilities, the company achieved an overall increase in sales volume of various insulin products, while continuing to increase the market share of the company's products. In 2023, the company sold 83.2212 million units, up 12.84% year on year. Among them, sales of insulin analogs increased by more than 60% year on year, and the increase in product sales greatly offset the impact of price reduction after the implementation of insulin collection.
Focus on endocrine metabolism and lay out products for multiple indications. The company continues to expand R&D potential in the field of endocrine metabolism treatment, and has now expanded the treatment field from diabetes to gout/hyperuricemia treatment. At the same time, the company continues to explore the layout of products with multiple indications such as hypoglycemia, weight loss, non-alcoholic steatohepatitis (NASH), etc. The research projects include 3 first-class new drugs in the field of diabetes treatment, 2 new first-class drugs in the treatment of gout/hyperuricemia, and chemical-oral drugs in the field of gout treatment. In the field of diabetes treatment, the company's GLP-1/GIP dual-target receptor agonist (THDBH120 for injection) completed the first clinical trial enrollment for hypoglycemic indications in December 2023, and obtained a notice of acceptance of the application for weight loss indications in February 2024; the oral small molecule GLP-1 receptor agonist (THDBH110 capsules) completed the enrollment of the first clinical phase I subjects in December 2023. In the field of gout treatment, the company's THDBH130 tablets completed key phase IIa clinical trials in January 2024 and reached the main goal; THDBH151 tablets have now completed a summary report on phase I clinical trials. The company's R&D work progressed smoothly, laying a solid foundation for long-term development.
Profit Forecasts, Valuations, and Ratings
We maintain our profit forecast. We expect the company to achieve net profit of 13.35 (+14%), 14.89 (+11%), and 16.52 (+11%) billion yuan in 2024-2026, corresponding to current EPS of 0.67 yuan, 0.75 yuan, and 0.83 yuan, respectively, corresponding to current P/E of 15, 13, and 12 times, respectively. Maintain a “buy” rating.
Risk warning
The risk of sales and promotion of new products falling short of expectations, risk of sales renewal and price reduction exceeding expectations, risk of R&D progress falling short of expectations, risk of lifting the ban on restricted shares, and risk of equity pledges.