Incident: The company announced its 2023 annual report, achieving operating income of 8.222 billion yuan (-0.33%), net profit of 987 million yuan (+14.49%), net profit after deducting non-return to mother net profit of 952 million yuan (+23.80%). The company confirmed that the investment income of joint ventures and joint ventures was 295 million yuan (+49.83%), mainly due to the excellent performance of SmithKline holding 25% of shares (+39.01%). After excluding related effects, net profit of non-return to mother was 657 million yuan (+14.86%). On a quarterly basis, Q4 achieved operating income of 2,429 billion yuan (-9.57%), net profit to mother of 129 million yuan (-3.25%), and net profit of 110 million yuan (-8.50%) after deducting non-return to mother. The company increased investment in R&D and sales in the fourth quarter, and also calculated asset impairment losses of 54.68 million yuan.
Sales of quick-acting heart saving pills exceeded 2 billion, driving high growth in the cardiovascular and cerebrovascular categories. By treatment sector, in 2023, revenue from cardiovascular and cerebrovascular products increased 20.17% year on year. Sales of the core product, quick-acting heart saving pills, surpassed 2 billion yuan for the first time, and some provinces bid for the new specification of 60 pills/box (winning bid price 36 yuan), but at present, procurement by medical institutions is still dominated by 50 pills*3/box; revenue from respiratory system products increased 37.44% year on year; facial products increased 91.51% year on year; digestive system products fell 23.63% year on year; revenue from urinary system products fell 1.65% year on year.
Continue to cultivate varieties worth over 100 million yuan to increase channel coverage for core single products. On the product side, by the end of '23, the company had 599 drug approval numbers. Sales of 10 varieties had exceeded 100 million yuan in '23, and achieved annual industrial revenue of 4.930 billion yuan, an increase of 10.34% over the previous year. On the market side, the company's products have a strong coverage rate. Quick-acting Heart Saving Pills and Jingwanhong Ointment have covered 500,000 pharmacies and 100,000 medical terminals; in '23, the coverage rate of products such as clear throat drops, lung cleansing and anti-inflammatory pills, throat cleansing granules, gastrointestinal relief pills, etc. has been significantly improved; products such as Niuhuang Qingxin Pills, Yasugong Gyuhuang Pills, and Qinggong Shoutao Pills have been effectively penetrated; products such as toothache stop pills and Wuji Baifeng tablets have increased exposure in e-commerce channels; doctors with specialty pharmaceuticals that meet the broad market have received increased exposure in e-commerce channels; doctors with specialty pharmaceuticals that meet the broad market have received increased exposure in the third terminal. Approval; the academic strength of many medical-oriented products, such as Muqi capsules, has been steadily improving.
Secondary development of core varieties was carried out, and classic recipes were studied, covering a wide range of treatment fields. The company carries out innovative work around “innovation leadership, brand operation, and digital intelligence transformation”. R&D expenses in 2023 were 185 million yuan, an increase of 20.56% over the previous year. Currently, the company is carrying out secondary development of products such as Jingwanhong Ointment, Clear Throat Drops, Zilong Gold tablets, etc., and is carrying out clinical research in the direction of pre-hospital first aid, long-term use, and plateau reaction of the quick-acting heart relief pills. At the same time, it is preparing the first batch of 10 classic recipes to be studied, covering the fields of cardiovascular, respiratory, digestive, and rheumatic bone pain.
Profit forecast: We expect the company's net profit to be 1,176 billion yuan, 1,412 billion yuan, and 1,692 billion yuan respectively, up 19.2%, 20.1%, and 19.8% year-on-year respectively. The corresponding EPS is 1.53 yuan, 1.83 yuan, and 2.20 yuan respectively. The company completed mixed reform of state-owned enterprises, improved quality and efficiency, promoted marketing reforms, and laid out a “three core and nine wings” strategy. We gave the company 25-30X PE in 2024, with a corresponding reasonable value range of 38.17-45.80 yuan, maintaining the “superior to the market” rating.
Risk warning: industry policy risks; risks of marketing reforms falling short of expectations; price fluctuations and quality risks of raw materials; risk of core varieties falling short of expectations after price increases.