The performance is in line with expectations and is expected to continue the steady growth trend. In 2023, the company achieved operating income of 39.11 billion yuan, +7.2% year-on-year, and maintained steady growth; net profit to mother was 4.09 billion yuan, +36.4% year-on-year, mainly due to the impact of investment income and profit and loss from changes in fair value. Furthermore, transactional financial assets declined sharply by 93.8% compared to the beginning of the year.
In the future, with the transformation of the company's business model and the continuous introduction of supporting policies related to traditional Chinese medicine, the company is expected to maintain a steady growth trend.
Core products are growing steadily to create a basic market for revenue growth. By business, the company's four major businesses continue to lead, and the monetization capacity of core products continues to increase: 1) The pharmaceutical division achieved revenue of 6.48 billion yuan (+8.2%), with the Baiyao series maintaining a good growth trend, with Yunnan Baiyao aerosol sales revenue contributing more than 1.7 billion yuan, an increase of 15.3% over the previous year; generic drug series products seized the rapid market release period and sales of various drugs increased dramatically; 2) The health products division achieved revenue of 6.42 billion yuan (+6.5%), of which Yunnan Baiyao toothpaste market share reached 24.6%, continuing to maintain the leading position in the industry; 3) The Chinese Medicine Resources Division achieved revenue of 17.1 billion yuan (+22.0%), of which the export revenue of Sanqi Chinese herbal medicines increased sharply by 81% year on year, contributing to part of the company's revenue growth while ensuring the stable supply and price of the company's strategic varieties; 4) The commercial distribution sector achieved revenue of 24.49 billion yuan (+5.6%), effectively improving overall operating efficiency throughout the year, increasing overall order fulfillment rate by 7.4%, and increasing the speed of product delivery by 19%.
Investment in R&D is stable, and subsequent products are expected to become a new growth point for performance. In 2023, the company invested 344 million yuan in R&D, accounting for 2.5% of the company's industrial revenue. The number of R&D personnel reached 527, an increase of 92 over the end of 2022. The company continues to maintain the intensity of R&D investment, and many studies have made important progress: the company is carrying out phase II clinical trials of all three or seven innovative Chinese medicine tablets, and is expected to obtain a clinical summary report in 2025; the nuclear drug INR101 and INR102 projects have been approved for marketing by the Drug Administration; the Phase II clinical project has been completed and accepted, and phase III clinical design and preparations are underway.
Considering the gradual increase in the company's operating efficiency and a slight increase in gross margin level, and adjusting future fair value income and investment income, it is predicted that the company's earnings per share for 2024-2025 will be 2.69 yuan and 2.81 yuan (the original forecast value was 2.60/2.84 yuan), respectively, and the additional 2026 earnings per share will be 2.94 yuan. According to comparable companies, the company was given a price-earnings ratio of 19 times in 2024, and the corresponding target price was 51.11 yuan, maintaining the purchase rating.
Risk warning
Drug sales fall short of expectations, innovative drug development falls short of expectations, etc.