Introduction to this report:
The company released its 2023 annual report. The performance was in line with expectations. The core variety of Baiyao drugs and health products continued to grow at a high rate. The profit fluctuation in 23Q4 was obvious, but overall disturbances were significantly reduced, and the dividend ratio continued to be high, demonstrating confidence in future development.
Key points of investment:
Maintain an “Overweight” rating. The company released its 2023 annual report, and the results were in line with expectations. Considering the rich product matrix and the continued development of online channels, sales expenses may have increased. The 24-25 EPS will be lowered to 2.51/2.72 yuan (originally 2.57/2.84 yuan), and the 26-year EPS will be added 2.84 yuan. Referring to the industry average, the 24-year PE 25X will be given, the target price will be maintained at 63.36 yuan, and the “increase” rating will be maintained.
Continuing to focus on the main business, white medicine series drugs and health products continue to grow at a high rate. 23 years of revenue of 39.111 billion yuan (+7.19%), four major business groups (BG): ① Pharmaceutical BG's revenue of 6.481 billion yuan (+8.16%), mainly due to good growth in the Baiyao series, including aerosols exceeding 1.7 billion yuan (+15.27%), ointments exceeding 900 million yuan, capsules exceeding 600 million yuan, and powders and band-aids; other categories are also growing rapidly. It is expected that increased multi-channel marketing and strong brand effects will continue to grow in the future; ② Health products BG achieved revenue of 6.422 billion yuan (+6.50%), the main benefits At Online and offline efforts continued, with toothpaste market share of 24.6% and continued to rank first in the market; ③ TCM Resources BG's external revenue was 1.71 billion yuan (+22%); ④ provincial pharmaceutical revenue was 24.49 billion yuan (+5.63%).
Fair value profit and loss narrowed significantly, and Q4 profit fluctuated significantly. It is expected that it will gradually clear out in the future. Profit returned to mother in '23 was 4,094 billion yuan (+36.41%). The high growth rate was due to fair value profit and loss, and significant year-on-year narrowing of asset and credit impairment, after deducting non-net profit of 3,764 billion yuan (+16.45%). Financial assets at the beginning and end of the year were 2,868 billion yuan and 546 million yuan respectively, of which transactional financial assets were 2,416 billion yuan and 149 million yuan respectively. 23Q4 profit attributable to mother - $0.3 billion, net profit - $89 million, year-on-year respectively - 730 million yuan/-620 million yuan, respectively. It is mainly due to increased concentration of 23Q4 promotions and salary accruals and a decline in income from changes in investment and fair value. It is expected that subsequent disturbances will no longer occur, and profits will return to normal growth.
The dividend ratio continues to be high, demonstrating management's confidence in development. The 23-year dividend plan is a dividend of RMB 20.77 for every 10 shares, with a total dividend of RMB 3.706 billion, accounting for 90.53% of net profit attributable to mother. The dividend ratio has continued to exceed 90% in the past two years. The high dividend strategy shows management's confidence in development.
Risk warning: Channel expansion falls short of expectations, product sales fall short of expectations