Brief performance review
On March 28, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 15.62 billion yuan, +10.6% year on year; net profit to mother was 82 billion yuan, +132.0% year over year; net profit after deducting non-return to mother was 770 million yuan, +111.3% year over year.
Looking at a single quarter, the company achieved revenue of 3.44 billion yuan in Q4 of 2023, -1.6% year on year; net profit to mother of 64 million yuan, or -35.7% year on year; net profit after deducting non-return to mother of 59 million yuan, +35.0% year on year.
Management analysis
Main products are being released rapidly, and the pharmaceutical industry is growing well: by sector, in 2023, the company's pharmaceutical industry achieved revenue of 10.388 billion yuan, +19.4% year over year, of which modern traditional Chinese medicine achieved revenue of 6.604 billion yuan, +31.64% year over year; chemicals achieved revenue of 3.784 billion yuan, +2.72% year over year. Among the core varieties: Taiji Agastache Zhengqi Oral Liquid achieved revenue of 2,271 million yuan, +45% year over year; emergency syrup achieved revenue of 881 million yuan, +67% year over year; Tongtian Oral Liquid achieved revenue of 316 million yuan, +10% year over year; sinusitis oral liquid achieved revenue of 261 million yuan, +22% year over year; compound acetaminophen tablets (II) (hashrate) achieved revenue of 163 million yuan, +55% year over year. The pharmaceutical business achieved revenue of 7.726 billion yuan, -3.3% year on year; the Chinese herbal medicine resource sector achieved revenue of 1,017 billion yuan, +118.7% year over year.
Increased R&D investment and improved profitability: In 2023, the company's sales expenses rate was 33.45%, an increase of 0.41 pct over the previous year, the management expenses ratio was 4.74%, a year-on-year decrease of 0.53 pct, and the R&D expense ratio was 1.5%, an increase of 0.75 pct over the previous year. In 2023, the company carried out 31 key R&D projects, including: 16 traditional Chinese medicines, 14 chemicals, 1 biopharmaceutical; and 7 major health product research and development projects. Significant progress has been made in drug research projects focusing on new biopharmaceutical projects, innovative drugs, classic recipes, narcotics, and APIs. In 2023, the company's gross margin was 48.6%, up 3.17pct year on year, net margin was 5.46%, up 3.04pct year on year, and profitability increased steadily.
Profit Forecasts, Valuations, and Ratings
The company's core varieties are remarkable and continue to show its brand strength. We are optimistic that the company's pharmaceutical industry will continue to achieve good growth and help improve performance. Based on the company's development situation, we lowered our 2024-2025 revenue and profit forecast. The original forecast value of revenue for 2024-2025 was 203.36/236.93 billion yuan, and the original forecast value of net profit to mother was 1,288/1,658 billion yuan. Currently, revenue for 2024-2026 is 175.75/206.16/23.131 billion yuan, respectively, up 13%/17%/12% year on year, respectively, and net profit to mother is 11.06/14.21/16.65 billion yuan respectively, up 35% year-on-year /28%/17%, EPS is 1.99/2.55/ 2.99 yuan respectively, and the current price is 17/13/11 times PE, respectively, maintaining the “gain” rating.
Risk warning
Industry regulatory policies strengthen risks, reduce the risk of volume procurement and price reduction, increase in company product costs, and increase the risk of market competition.