Incident: Yunnan Baiyao released its 2023 annual report. During the reporting period, the company achieved revenue of 39.111 billion yuan (YoY +7.19%), net profit of 4,094 billion yuan (YoY +36.41%); net profit after deducting non-attributable net profit of 3.764 billion yuan (YoY +16.45%); 23Q4 achieved revenue of 9.423 billion yuan (YoY -1.57%), net profit to mother -30 billion yuan (YoY -104.27%), net profit of 90 million yuan (YoY -116.99%) Achieve steady growth.
The four major business groups seek steady progress. 1) The pharmaceutical business group achieved main revenue of 6.481 billion yuan (+8.16%), maintaining a good growth trend. Among them, sales of white medicine aerosols exceeded 1.7 billion yuan (+15.27% year over year), Gong She-ning resumed listing, sales revenue +47% year-on-year, and Qi Xiekang achieved sales revenue of 231 million yuan (+15% year over year); 2) The health products business group achieved main revenue of 6.422 billion yuan (+6.50% year over year). Among them, Yang Yuanqing accelerated growth, and sales revenue exceeded 300 million yuan (+36% year over year); 3) The Chinese medicine main resource business group achieved sales revenue of RMB 300 million (+36% year over year) Operating income 17.01 billion yuan (+22% year over year), of which 37's export revenue was +81% year over year, and effectively inhibited the rise in the price of the company's medicinal herbs; 4) Provincial pharmaceutical companies achieved main revenue of 24.49 billion yuan (+5.63% year over year), improving operational efficiency and increasing overall order fulfillment rate by 7.4%.
Overall gross margin increased, and due to multiple factors, apparent profit declined in 23Q4. The gross sales margin in 2023 was 26.51% (+0.19pcts year over year), which is expected to benefit from improved quality and efficiency and an increase in the share of the pharmaceutical industry. The net profit margin of the 23Q4 company was 0% (13.89% in the first three quarters), mainly due to the fact that 23Q4 promotions and payable employee remuneration payments were more concentrated compared to the previous three quarters, and the return on changes in the fair value of transactional financial assets declined in Shanghai pharmaceutical investment. The 23Q4 sales expense ratio is 17.38% (+6.13pcts year over year), and the increase in sales expenses is expected to lay the foundation for 24-year marketing.
Stable dividends return to investors. According to the 2023 dividend plan (still to be submitted to the shareholders' meeting for consideration), the company paid 3.706 billion yuan in dividends, accounting for 90.53% of net profit to mother, with a dividend rate of 4.09% (calculated based on the closing price on March 29). Furthermore, the company will repurpose the 12,599,946 shares purchased through centralized bidding transactions “for cancellation to reduce registered capital.”
Maintain a “buy” rating. The company's net profit for 24-26 is estimated to be 45.01/49.61 billion yuan, respectively, up 10.0%/10.2%/10.5% year on year, and EPS is 2.51/2.76/3.05 yuan respectively. Currently, the corresponding stock price valuation is 20.0x/18.2x/16.4x, respectively. Since the company is a leader in traditional Chinese medicine, impairment and investment risks have basically been cleared, it is actively seeking a second growth curve and maintaining a “buy” rating.
Risk warning: Risk of insufficient supply of raw materials, risk of new product promotion falling short of expectations, and risk of price increase.