Performance summary: In 2023, the company achieved operating income of 3,999 billion yuan (+5.79%), net profit attributable to mother of 619 million yuan (-6.55%), net profit after deducting non-attributable net profit of 533 million yuan (-11.60%), gross profit margin of 50.57% (-2.70pcts), and a net profit margin of 15.59% (-2.08pcts). Affected by depreciation and amortization and increased R&D and management expenses brought about by the commissioning of new production capacity, the company's profit declined, and short-term performance was under pressure.
By business segment: (1) Revenue of finished drugs was 2,326 billion yuan (+4.98%). In 2023, the company carried out marketing reforms, changing from a product division system to two major divisions: hospitals and retail. After the adjustment, domestic trade revenue for finished pharmaceutical preparations of 23H2 was 1,068 billion yuan, an increase of 6.18% over the previous month. The results of the reform were remarkable. Furthermore, the company's first Class 1 new drug, Dacinib, was approved for marketing, and commercialization is progressing in an orderly manner. (2) API revenue of 956 million yuan (+9.60%). The company seized the opportunity for downstream companies to replenish inventory and achieved steady growth throughout the year.
(3) Medical device revenue of 637 million yuan (+1.39%). Due to the weakening of overseas demand after the epidemic, domestic equipment procurement slowed down due to industry policies, and the company's equipment revenue growth rate declined.
New production capacity has been launched one after another, and the three major businesses are expected to pick up steadily. In 2023, the company's new production capacity was launched one after another. Currently, the 3 billion tablets solid preparation project and the Inner Mongolia traditional Chinese medicine production base have all been put into operation, and the first phase of the Shandong API base project has been completed. Benefiting from marketing reforms and the introduction of new pharmaceutical production capacity, the company's finished drug revenue is expected to accelerate; at the same time, didacinil provides new treatment options for patients with insomnia with its differentiated safety advantages, and is expected to achieve steady sales growth. Furthermore, based on API process optimization, cost advantage expansion, and product structure upgrade in the device sector, the company's API and medical device business is expected to maintain steady growth.
Profit forecast and rating: We expect the company to achieve revenue of 44.80/50.09/5.616 billion yuan in 2024-2026, up 12.0%/11.8%/12.1% year on year; net profit to mother of 6.99/8.07/948 million yuan, up 12.9%/15.4%/17.5% year on year. Considering the volume of Didacini going public, the investment of new production capacity brought about an increase in performance and maintained a “buy” rating.
Risk warning: Competition in the formulation market intensified, product sales fell short of expectations; progress in new product development and approval fell short of expectations; competition in the API market intensified.