In 2023, the company achieved revenue of 15.623 billion yuan (yoy +10.58%), net profit of 822 million yuan (yoy +131.99%), and net profit of non-return to mother of 774 million yuan (yoy +111.35%). Among them, the fourth quarter achieved revenue of 3.44 billion yuan (-1.91% YoY, +9.85% YoY), net profit of 64 million yuan (YoY -36.48%, YoY -66.78%), and net profit of 59 million yuan (YoY +19.96%, YoY -58.63%) after deducting net profit from non-return to mother.
The pharmaceutical industry is growing steadily, and traditional Chinese medicine has performed well. In 2023, the pharmaceutical industry achieved revenue of 10.388 billion yuan, up 19.40% year on year, gross margin of 64.74%, up 0.62 pct year on year. By business, modern traditional Chinese medicine still maintained steady growth, achieving revenue of 6.604 billion yuan, up 31.64% year on year; sales of the core product Agastache Zhengqi Oral Liquid achieved sales of 2,271 billion yuan, up 45% year on year; sales of emergency syrup reached 881 million yuan, up 67% year on year; Tongtian Oral Liquid achieved sales of 316 million yuan, up 10% year on year; and sinusitis oral liquid achieved sales of 261 million yuan, up 22% year on year. In 2023, chemical pharmaceuticals achieved operating revenue of 3.784 billion yuan, an increase of 2.72% over the previous year. The growth rate declined due to factors such as the epidemic. Anti-infective drugs with Eposerin as the core achieved revenue of 1,869 billion yuan, a slight decrease over the previous year. Revenue from neurological drugs such as narcotics was 898 million yuan, down 2.36% year on year.
The commercial restructuring improved the quality of operations, and the integration of the Chinese herbal medicine business achieved rapid growth. In 2023, the company's pharmaceutical business achieved revenue of 7.726 billion yuan, a year-on-year decrease of 3.31%, promoted business integration in the commercial sector, improved business quality, and achieved a gross margin of 9.60%, an increase of 0.15 pct over the previous year. In 2023, the company completed the full integration of the Chinese herbal medicine resource business. The annual Chinese herbal medicine resource business achieved revenue of 1,017 billion yuan, an increase of 118.71% over the previous year. Taiji Cordyceps was exported to Hong Kong for the first time. In 2024, on the basis of consolidating large varieties such as Banxia and Cangshu, the company will add planting area for licorice and Huanglian to advance the pace of industrialization of Cordyceps.
Integrate marketing platforms to strengthen core products. In 2023, the company focused on core brands to promote the rapid growth of OTC products. Taiji Agastache Zhengqi Oral Liquid strengthened the moisture removal circuit, extended moisture removal application scenarios, and tried cross-border cooperation to promote the growth of online and new retail. In 2024, the company will further integrate the marketing platform, implement a large-scale strategy, and promote the Agastache and Emergency Branch series to achieve sales in all categories.
Maintain a “Highly Recommended” investment rating. We are optimistic about the company's advantage as the core traditional Chinese medicine platform under Sinopharm Group. We expect the Chinese medicine business to grow steadily, and the chemical and pharmaceutical business will be disrupted in the short term. The 2024-2026 revenue forecast is 181.78/209.36/23.443 billion yuan, up 16.4%/15.2%/12.0% year on year, and the net profit to the mother is 10.56/13.26/1,597 billion yuan, up 28.4%/25.6%/20.4%. The corresponding PE is 17/14/12 times, maintaining the “highly recommended” investment evaluation grade.
Risk warning: core product collection, cost increase, R&D failure, market risk, policy risk, etc.