Shareholders' equity increased 6.2% year over year to 9.05 billion yuan: in 2023, the company achieved revenue of 596.57 billion yuan, an increase of 8.1% year over year. By sector, the pharmaceutical distribution sector's revenue was 441.05 billion yuan, up 8.5% year on year, accounting for 71.4%; the medical device sector increased 7.8% year on year to 13.21 billion yuan, accounting for 21.1% of revenue; the pharmaceutical retail sector increased 8.2% year on year to 35.69 billion yuan, accounting for 5.8% of revenue; and other business revenue increased 1.7% year on year to 10.39 billion yuan, accounting for 1.7% of revenue. The company's overall gross margin fell 0.5 percentage points to 8.1% year on year. At the same time, the company actively controlled expenses. Among them, the distribution rate fell 0.1 percentage points to 2.93% year on year, the administrative rate fell 0.03 percentage points to 1.46% year on year, and financial expenses fell 0.17 percentage points to 0.41% year on year. Plus the impact of other earnings this year (mainly due to asset sales of 660 million yuan in 23, compared to only 120 million yuan in other income for the same period last year). In summary, the company's profit for the period increased 4.6% year on year to 15.01 billion yuan, while profit attributable to shareholders during the period increased 6.2% year on year to 9.05 billion yuan. The dividend is $0.87 per share, with a dividend payout ratio of 30%.

The profit margin of distribution operations was still declining in '23, and the equipment industry is gradually gaining strength: (1) In '23, the company's pharmaceutical distribution operating profit margin fell 0.18 percentage points to 3.00% year on year. By the end of '23, nine batches of national collection had been carried out, which affected the profit margin level of pharmaceutical distribution operations, but the company is still striving to positively boost operating profit margins by expanding high-margin pharmaceutical marketing business revenue. (2) The company's medical device operating profit margin fell 0.73 percentage points year on year to 3.48% in '23. By the end of '23, the national centralized procurement project for medical consumables (including reagents) had been expanded in an orderly manner to 4, which led to a decline in the profit margin of device distribution. Based on the main distribution business, the Group focuses on extending supply chain services and actively undertakes 10 types of projects including equipment asset management and maintenance services, SPD services, and medical inspection projects. At the beginning of 2023, Sinopharm Holdings and GE Healthcare formally signed a joint venture agreement, and the “Sinopharm Imaging/SINO IMAGING” brand was officially launched at the end of November of the same year, marking the official launch of the Group's high-end medical imaging equipment manufacturing business. The 4K endoscopic camera system independently developed by Sinopharm Xinguang has obtained marketing approval. The product has achieved full-chain 4K data flow control from collection, transmission, processing and display, and has reached the leading international level in terms of optical path design and production process. (3) The company's pharmaceutical retail operating profit margin increased 0.73 percentage points year-on-year to 3.21% in '23. The number of retail pharmacies increased by +1,356 to 12,109 over the same period. Among them, the number of major pharmacies in China increased by 1203 to 10,516, and the number of specialty pharmacies increased by 153 to 1,593. The number of the company's dual-channel qualified stores increased by 28% year-on-year to 1127.

The target price is HK$30.9, maintaining the purchase rating: As China's aging process accelerates, the company's pharmaceutical business and retail business will continue to develop steadily. The company hopes to maintain steady development at a rate of 2-3 percentage points higher than the industry's growth rate for a long time, and develop collaboratively with high-margin businesses such as pharmaceutical marketing, supply chain services, and the device industry. Central enterprises use market value assessments as one of the additional assessment indicators. Using dcf as the company's valuation, we calculated the company's target price of HK$30.9, corresponding to 9.6 times PE in 24 years, with room for an increase of 51.8% compared to yesterday's closing price and maintaining the purchase rating.