Incidents:
On March 29, 2024, Da Ren Tang released its 2023 annual report: in 2023, the company achieved operating income of 8.222 billion yuan (-0.33%), net profit to mother of 987 million yuan (+14.49% year over year), and net profit of 952 million yuan (+23.80% year over year) after deducting net profit of non-return to mother.
Investment highlights:
Product coverage has increased significantly, academic ability has been steadily improved, and product and market development has helped continue to grow. According to the company's announcement, in 2023, quick-acting heart saving pills and Beijing Wanhong Ointment have covered 500,000 pharmacies and 100,000 medical terminals; in 2023, the coverage rate of products such as clear throat drops, lung cleansing and anti-inflammatory pills, throat cleansing granules, gastrointestinal relief pills, etc. has been significantly increased; at the same time, the company added 10 new varieties into 20 national, provincial and municipal guidelines and consensus, driving the transformation of academic results.
In 2023, the company's industrial revenue was 4.930 billion yuan, up 10.34% year-on-year. In 2023, sales of quick-acting heart saving pills surpassed 2 billion yuan for the first time, and Qingyuan drops, Angong beef yellow pills, Jingwanhong Ointment, and anti-lung anti-inflammatory pills entered the 200 million yuan category. Judging from the sales volume, the variety performance varies greatly. Sales of Quick-Acting Heart Pills/Angong Gyuhuang Pills/Jingwanhong Ointment/Anti-Lung and Anti-Inflammatory Pills increased by 14.16%/80.79%/48.50%/64.66%/16.50%, respectively, while sales of Tongmai Yangxin Pills/Gastrointestinal Relief Pills/Panqi Capsules/Gastrointestinal Tablets and Zilong Gold Tablets were -20.85%/-29.55%/-6.93%/+1.72%/-1.47%, respectively.
In 2023, the company withheld net profit of $952 million (+23.80% YoY), of which investment income in joint ventures and joint ventures was $295 million (+49.83% YoY), and cost and expense control was optimized. In 2023, the growth rate of the company's industrial direct materials/direct labor/manufacturing expenses was lower than the growth rate of industrial revenue. Sales expenses/management expenses/R&D expenses increased by 7.98%/0.99%/20.56% respectively, and the growth rate of sales and management expenses was lower than the growth rate of industrial revenue.
Profit forecasts and investment ratings take into account the uncertainty of pharmaceutical policies and consumer markets, and considering that there is plenty of room for improvement in the penetration rate of quick-acting heart saving pills in the cardiovascular field. At the same time, we are optimistic about the recovery of in-hospital products and the increase in the profitability of second-tier products. We expect net profit to be 12.34/14.92/1,859 billion yuan in 2024-2026, corresponding to the current stock price PE of 17.41/14.40/11.56 times, maintaining the “buy” rating.
Risks suggest that product sales fall short of expectations; prices of traditional Chinese medicine raw materials have risen sharply; competition has intensified; the profitability of second-tier products falls short of expectations; macroeconomic development falls short of expectations; pharmaceutical policy risks, etc.