Improved operational quality and efficiency, rapid profit growth, and maintenance of the “buy” rating
In 2023, the company achieved revenue of 15.623 billion yuan (+10.58% year over year, all below); net profit to mother of 822 million yuan (+131.99%); net profit after deducting non-return to mother of 774 million yuan (+111.35%). In terms of profitability, gross margin was 48.6% (+3.18pct) and net margin was 5.26% (+2.76pct) in 2023. On the cost side, the 2023 sales expense ratio was 33.45% (+0.41pct); the management expense ratio was 4.74% (-0.53pct); the R&D expense ratio was 1.5% (+0.74pct); and the financial expense ratio was 0.94% (-0.33pct).
We are optimistic about the company's core product market expansion prospects. Taking into account expenses such as product promotion and new product development, the 2024-2025 budget was lowered and the net profit forecast for 2026 was added. It is estimated to be 10.93 billion yuan, 13.00, and 1,498 billion yuan (originally estimated 2024-2025 to be 12.40 billion yuan and 1,592 billion yuan), EPS is 1.96, 2.33, and 2.69 yuan/share, respectively. The corresponding PE price is 16.9, 14.2, and 12.4 times, respectively, maintaining the “buy” rating.
Revenue from digestive, metabolic, respiratory and health products grew rapidly, and gross margin increased by single digit by industry. In 2023, the company's pharmaceutical industry revenue was 10.388 billion yuan (+19.40%), pharmaceutical commercial revenue of 7.726 billion yuan (-3.31%), Chinese herbal medicine resources revenue of 1,017 billion yuan (+118.60%), service industry and other revenue of 52 million yuan (+17.98%), and inter-division offsetting of 3.684 billion yuan. In terms of drug treatment, digestive and metabolic revenue was $2,881 million (+36.99%), respiratory revenue of $2,642 million (+42.21%), anti-infective revenue of $1,869 million (-0.21%), nervous system revenue of $898 million (-2.36%), big health products revenue of 850 million yuan (+22.67%), cardiovascular revenue of 766 million yuan (+10.94%), and anti-tumor and immunomodulation revenue of 246 million yuan (-27.26%). Furthermore, gross margins in the three fields of digestion, metabolism, respiratory system, and general health increased by 6.42 pct, 3.32 pct, and 4.91 pct year-on-year, making a significant contribution to the impressive profit side growth rate.
Reform and development continue to advance, and digital transformation is fully launched
The industrial sector focuses on the main product strategy; the retail side digs deep into brand value and achieves break-through development; the academic side strengthens evidence-based support and empowers sales improvement. The commercial sector accelerates the “resource-business-management” integration reform, accelerates procurement and marketing linkage, and realizes batch and zero integration. The Chinese herbal medicine sector integrates herbal medicine cultivation, management, and Chinese medicine tablet processing resources, coordinates innovative business models, digitally drives the upstream and downstream expansion of the industrial chain to build core competitiveness.
Risk warning: Market competition intensifies, product sales fall short of expectations, and R&D speed falls short of expectations.