The company released its 2023 annual report. It achieved a total operating income of 3,999 billion yuan for the whole year, an increase of 5.79% over the previous year; realized net profit of 619 million yuan, a year-on-year decrease of 6.55%, putting pressure on the profit side. The company adjusted its drug sales model in 2023, and its main business maintained a growth trend. At the same time, it vigorously promoted investment in R&D, deepened neuropsychiatric and other advantageous treatment fields, and maintained a purchase rating.
Key points to support ratings
The company achieved steady growth on the revenue side in 2023, with slight pressure on the profit side. The company released its 2023 annual report. The company achieved a total operating income of 3,999 billion yuan, a year-on-year increase of 5.79%; realized net profit of 619 million yuan, a year-on-year decrease of 6.55%; realized net profit of 533 million yuan, a year-on-year decrease of 11.60%; achieved net operating cash flow of 793 million yuan, a year-on-year decrease of 7.35%. The profit side was under pressure, mainly affected by depreciation and amortization and increased R&D and management expenses.
The sales structure for finished drugs was adjusted to further expand the incremental space. In 2023, the company's drug sales were adjusted from a “split line system” to a “hospital-retail system” model. Instead of setting up departments with product pipelines, the hospital division and retail division were re-established by market within and outside the hospital, which effectively strengthened sales capacity. In 2023, we achieved revenue of 2,326 billion yuan for finished drugs, an increase of 4.98% over the previous year. The performance maintained steady growth, and further expanded the room for future growth.
Investment in R&D has increased, and the pipeline is expected to continue to advance. In 2023, the company increased R&D investment, and R&D expenses reached 401 million yuan, an increase of 9.23% over the previous year. In December 2023, the company's first Class 1 new drug, Didarcinil capsules, which are suitable for short-term treatment of patients with insomnia, obtained CDE registration approval. Preparations such as raw material production plan declaration, GMP certification of raw material formulations, and agent campaigns have now been completed. Kennonin was marketed and sold at the end of March 2024. Other innovative drug projects are also underway. JX11502MA capsules and rehabilitative enteric capsules have all completed the IIa stage. The company has officially entered the innovative drug era, and the combination of imitation will be the main theme of the company's development for some time to come.
valuations
Due to depreciation and amortization and increased R&D and management expenses, the company's profit side is under pressure, so we adjusted the company's profit expectations. The company's net profit for 2024-2026 is expected to be 649 million yuan, 749 million yuan, and 889 million yuan respectively, EPS of 0.75 yuan, 0.87 yuan and 1.03 yuan respectively, and PE is 14.2 times, 12.3 times, and 10.4 times, respectively. As R&D results are gradually implemented, it is expected to increase performance, so it still maintains a purchase rating.
The main risks faced by ratings
The progress of new drug marketing falls short of expectations, risk of policy changes, and risk of sales of new drugs falling short of expectations.