Incident: The company released its 2023 annual report. It achieved annual revenue of 3.13 billion yuan, +22.7% year-on-year, and realized net profit of 800 million yuan, +116.6% year-on-year, after deducting net profit of 780 million yuan without return to mother, +112.5% year-on-year.
Sales of neovactin increased rapidly in the fourth quarter. On a quarterly basis, Q1/Q2/Q3/Q4 revenue was 91/9.1/5.5/770 million yuan respectively, up 38.2%/32.9%/-10.9%/28.5% year-on-year respectively. Sales revenue growth in the fourth quarter returned to the level of the first half of the year. The short-term impact of the external environment is expected to subside. The gross profit margin of sales for the whole year is 95.1% (+0.8pp). The increase in gross margin is mainly due to a rapid increase in revenue and dilution costs. Sales expense ratio 56.1% (+0.9pp), management expense ratio 4% (-1.2pp), R&D expense ratio 0.4% (-2.9pp). It is expected that the decline in the management cost rate is mainly due to the faster growth rate on the revenue side and the dilution of expenses. The large decline in R&D expenses is mainly due to the high base effect brought about by the shift in Russian vaccine project development expenses to cost-effective processing last year. Net profit margin for 2023 was 25.6% (+11.1% YoY). In 2023, the company's intangible assets depreciated by 190 million yuan. At the same time, the net profit and loss due to changes in the fair value of the shares held by Sri Lanka Microbiology was reduced by 320 million yuan. In 2022, the company calculated asset impairment and conversion of development expenses related to the Russian vaccine project, resulting in a decrease of 320 million yuan in net profit to the mother. Furthermore, in 2023, the company received an increase of 180 million yuan in industrial support funds from the Shannan Happy Home Construction Administration. Therefore, combined with the above factors, the company's net interest rate increased dramatically in 2023. Up to now, the company's book balance of IMDO's intangible assets is 160 million yuan, and the balance of transactional financial assets held by the company is 520 million yuan.
Neoactive was renewed by health insurance in 2023, and the price adjustment was moderate. The company's product Neovactin is a genetically engineered drug for treating acute heart failure. It can quickly improve the symptoms and signs of heart failure in patients with heart failure, improve patients' quality of life, and reduce the cost and time of hospitalization for heart failure. The company's neovactin is an exclusive variety in China, and the drug was included in the Class B list by 2023 medical insurance. After this negotiation, the medical insurance payment price of Neovistin was 424.98 yuan (0.5 mg/stick), and a single hospitalization payment was not more than 3 days. The validity period of the agreement: January 1, 2024 to December 31, 2025. After the expiration of the validity period, it will be adjusted in accordance with the relevant health insurance regulations. Compared with the medical insurance payment standard of 445 yuan (0.5 mg/stick) negotiated in 2021, this is a 4.5% reduction.
Profit forecast and investment advice: Net profit due to mother for 2024-2026 is expected to be 1.09 billion yuan, 1.4 billion yuan, and 17.1 billion yuan respectively. The company's competitive pattern for nephostin is good and maintains a “buy” rating.
Risk warning: Neoactive sales fall short of expectations, risk of product development failure, cardiovascular implant product development progress or failure, risk of asset price fluctuations.