Event: The company released its 2023 annual report. In 2023, we achieved total revenue of 13.740 billion yuan, an increase of 21.22% year on year; net profit to mother was 2.701 billion yuan, an increase of 70.85% year on year.
Intermediates/APIs showed outstanding performance, and the formulation remained stable. Formulation sector: Achieved revenue of 5,024 billion yuan (+10.2%), and the insulin series achieved revenue of 1,118 billion yuan (-4.93%), of which recombinant insulin, glycine, and Mendon sold 507 million yuan, 423 million yuan, and 188 million yuan respectively. Antibiotic products (including animal protection) sold 3,533 billion yuan (+15.3%), of which injectable piperacillin sodium and tazobactam sodium sold 677 million yuan (+0.6%), amoxicillin capsules sold 547 million yuan (-5.5%), and veterinary pharmaceutical preparations sold 1.18 billion yuan (+48.1%). Intermediate/API sector: The intermediates and APIs sector achieved revenue of 2,317 billion yuan (+44.9%) and 6.399 billion yuan (+23.7%) respectively. The intermediates/APIs achieved a sharp rise in volume and price, driving rapid growth in the intermediate API sector. By region, the overseas business achieved revenue of 2,616 billion yuan (+10.3%) and domestic revenue of 6.10 billion yuan (+38.57%). The company continues to occupy a leading position in the domestic and export markets for intermediates and APIs.
The profit level has increased, and the cost rate has been continuously optimized. In 2023, the gross profit margin was 46.11% (+2.27pp), and the net profit margin was 19.66% (+5.71pp). The sharp rise in the volume and price of intermediates/APIs led to an increase in the company's profit. Sales expenses of 1,594 million yuan (-4.13%), sales rate 11.60% (-3.07pp). Management expenses of 790 million yuan (+12.30%), management fee rate 5.75% (-0.46pp). R&D expenses of 757 million yuan (+27.57%), R&D expenses of 5.51% (+0.27pp), the company made significant progress in several products in 2023, including GLP-1. Financial expenses of 67 million yuan (-18.01%), financing rate 0.49% (-0.23pp). The 2023 inventory balance was $2,238 million, accounting for 10.65% (-0.75pp) of assets.
The total balance of accounts receivable and notes receivable at the end of the 2023 period was $6.314 billion, accounting for 45.96% of revenue (+6.47pp)? The R&D pipeline layout is rich, and GLP-1 is in full bloom. The company has established full coverage in the field of diabetes. The project covers insulin analogs such as Tokugu insulin injections, Tokumendon double insulin mixed injections, and GLP-1 receptor agonists such as liraglutide injections. GLP-1 made significant progress in 2023:1) Liraglutide injection was reported; 2) the diabetes indication for simeglutide injection completed phase III clinical enrollment, and its weight loss indications were approved; 3) GLP-1/GCG/GIP three-target gastrointestinal hormones were clinically approved for diabetes, weight loss, NASH, etc., and their diabetes and weight loss indications were also clinically approved in the US; at the same time, second-generation gastrointestinal hormones are also being actively promoted.
Profit forecast and valuation: We expect the company's revenue for 2024-2026 to be 150.47 billion yuan, 158.06 billion yuan, and 16.592 billion yuan, respectively (the previous 24-25 forecast value was 164.39 billion yuan and 18.565 billion yuan), up 9.40%, 5.04%, and 3.97% year-on-year respectively; net profit to mother will be 28.70 billion yuan, 29.95 billion yuan, and 3.115 billion yuan (the previous 24-25 forecast value was 23.59 billion yuan and 2,655 billion yuan), respectively, up 6.23%, 4.36%, and 4.00% year-on-year, respectively. Maintain a “buy” rating.
Risk warning: Risk of falling short of expectations in the API and intermediates business; risk that Mendon's insulin promotion falls short of expectations; market competition intensifies, and sales of insulin products fall short of expectations.