2023 results are in line with our expectations
Tonghua Dongbao announced its 2023 results: operating income of RMB 3,075 billion in 2023, up 10.69% year on year; net profit of 1.68 billion yuan (0.59 yuan per share), down 26.17% year on year (mainly due to Tebao Biotech's investment income in 2022); net profit after deducting non-return to mother was 1,168 billion yuan, an increase of 38.88% year on year, mainly due to the good growth of the company's main business.
Development trends
Insulin sales continued to rise. According to pharmaceutical Rubik's Cube insulin sales data quoted in the company announcement, in 2023, the company's domestic insulin market share exceeded 40%, ranking first in the industry; the company continued to grow rapidly, with a share of nearly 10% in 2023. In 2023, the company sold 83.2212 million units of its full line of insulin products, up 12.84% year on year. Among them, sales of insulin analogs increased by more than 60% year on year.
Increase investment in R&D and promote product structure upgrading. In 2023, the company invested 420 million yuan in R&D, an increase of 4.7% over the previous year. According to the company's announcement, in 2023, the company's GLP-1RA liraglutide injection and the oral hypoglycemic drug engagliflozin tablets were successfully approved for marketing, continuing to enrich the company's variety in the diabetes field. In terms of research and pipeline, the company's Laipu Insulin Injection 25R completed phase III clinical trials in May 2023; THDBH130 tablets, a new class of drugs in the treatment of gout hyperuricemia, completed key phase IIa clinical trials in January 2024 and reached the main end point; THDBH150/THDBH151 tablets, a dual-target gout inhibitor, completed the Phase I clinical trial summary report. We believe that the company is expected to continue to expand its comprehensive layout in the field of metabolic diseases based on diabetes.
The process of insulin going overseas is speeding up. In the second half of 2023, the company reached a strategic cooperation with Jianyou Co., Ltd. to jointly enter the US insulin market. The company is steadily advancing the overseas registration of insulin analogues. According to the company's announcement, as of March 2024, the company Glargine Insulin has prepared registration data and applied for several developing countries, and has also completed preliminary preparations for Mendon Insulin registration applications in developing countries. The company continues to advance various tasks in EU and US FDA compliance projects for insulin glargine and Mendon insulin production sites. We believe that the progress of these projects is in line with market expectations.
Profit forecasting and valuation
Due to the impact of the price reduction in insulin collection, we lowered our 2024 revenue forecast by 8.4% to RMB 3.45 billion. However, considering the results of the company's product structure optimization and fee control, we kept the 2024 EPS forecast unchanged at 0.65 yuan, an increase of 11.2% over the previous year. We introduced an EPS forecast of 0.75 yuan for 2025, an increase of 15.0% year over year. We keep the company's outperforming industry rating and target price of 14.36 yuan unchanged, corresponding to a price-earnings ratio of 22.1 times/19.2 times in 2024/2025. The current stock price corresponds to the 2024/2025 price-earnings ratio of 16.8 times/14.6 times, and there is 31.5% upside from the target price.
risks
The amount of insulin products released fell short of expectations, and the progress of research and development fell short of expectations.