Incident: The company released its 2023 annual report, achieving operating income of 1,083 billion yuan, +40.26%; net profit to mother of 1,511 billion yuan, an increase in year-on-year losses; net profit after deduction of 1,543 billion yuan, an increase in year-on-year losses; net operating cash flow of 1,503 billion yuan, an increase in negative year-on-year values; and EPS (basic) of -2.80 yuan. The results are in line with market expectations.
Comment:
The commercialization of the main products grew strongly, and R&D expenses led to an increase in losses: 2023Q1-Q4, the company's revenue in a single quarter was 1.68/2.54/3.47/ 313 million yuan, respectively, +12.06%/26.94%/58.28%/54.83%; net profit attributable to mother -3.24/-3.80/ -3.27/ -483 million yuan; net profit not attributable to mother was 3.32/3.96/-3.33/ -483 million yuan. The sharp increase in the company's revenue in 2023 was mainly due to increased sales of tetracip and verdicitumab. The increase in losses is mainly due to the continuous advancement of various R&D pipelines in 2023, several innovative drugs are in the critical testing and research stage, and R&D expenses have increased dramatically. In addition, commercial sales investment team building costs and academic promotion activities have increased. As of December 31, 2023, the company's autoimmunity commercialization team had about 750 people, and the oncology commercialization team had nearly 600 people.
Continued vigorous investment in R&D, and the innovative drug echelon is gradually improving: in 2023, the company invested 1,306 billion yuan in R&D, accounting for 120.62% of revenue, all at a cost. As of the end of 2023, the progress of some of the main research projects was: RC18 (teitacip) has been approved for marketing in China, phase III clinical in the US; RC48 (vidicitumab) has been approved for marketing in China, phase II clinical in the US; RC88 (anti-mesothelin ADC) phase II clinical in China, phase II clinical in the US; RC118 (anti-Claudin18.2 ADC) China: phase I clinical; RC28 (anti-VEGF/FGF fusion protein) phase III clinical in China; RC148 (double (Heteroantibody) Chinese Phase I Clinical; RC198 (Anti-IL-15 and IL-15α Fusion Protein) Chinese Phase I Clinical, Australian Phase I Clinical; RC248 (Anti-DR5 ADC) Chinese Phase I Clinical. As the company's R&D work continues to advance, the innovative drug echelon is gradually taking shape, which will lay a more solid foundation for the company's long-term development.
Profit forecast, valuation and rating: Considering that the company's R&D investment exceeds our previous expectations, the net profit forecast for 2024-2025 was lowered to -11.82/-922 million yuan (the original forecast was -597/-032 million yuan), and the additional forecast for 2026 was -391 million yuan. Considering the company's excellent product innovation capabilities and potential overseas expansion potential, AH shares all maintain a “buy” rating.
Risk warning: risk of failure in innovative drug development; risk of sales promotion falling short of expectations; risk of overseas expansion falling short of expectations.