Incidents:
The company released its 2023 annual report. In 2023, the company achieved operating income of 3,999 billion yuan, a year-on-year increase of 5.78%, net profit to mother of 619 million yuan, a year-on-year decrease of 6.55%, and net profit after deducting non-return to mother was 533 million yuan, a year-on-year decrease of 11.60%.
Comment:
Q4 Revenue growth was fast, and performance was slightly lower than expected. 2023Q4 revenue increased 9.54% year over year and 8.53% month over month, which we judge was mainly driven by increased sales of finished drugs and APIs. The profit side was mainly affected by depreciation and amortization and increased R&D and management expenses. 2023Q4 decreased 23.22% year over year and 6.5 percent month over month.
The main business is growing steadily, and sales expenses are well controlled. By sector, annual revenue from finished drugs was 2,326 billion yuan, up 4.98% year on year; revenue from APIs was 956 million yuan, up 9.60% year on year; and revenue from medical devices was 637 million yuan, up 1.39% year on year, and the main business growth rate was steady. The company's gross profit margin in 2023 was 50.6%, down 2.7 pp year on year. We judge that it was mainly affected by drug collection price reduction and API price reduction; sales expense ratio was 19.6%, down 1.3 pp year on year; R&D cost ratio was 10.0%, up 0.3 pp year on year; management cost ratio was 5.3%, up 0.2 pp year on year.
Sales reforms have achieved remarkable results, and finished drugs have expanded incremental space. The company launched a sales strategy reform in 2023Q1. The hospital division focused on the in-hospital market, and the retail division focused on the out-of-hospital market. Domestic trade revenue for finished pharmaceuticals in the second half of the year was 1,068 billion yuan, up 6.18% month-on-month from 1,006 billion yuan in the first half of the year. Sales capacity increased, while continuously expanding the incremental space for stock varieties.
Continue to invest in research and development to open a new era of simulation integration. In 2023, the company invested 401 million yuan in R&D, an increase of 9.23% over the previous year. The company continues to promote the development and project establishment of innovative drugs and generic drugs. The company applies for more than 10 projects every year to form a number of generic drug product groups with cost advantages.
The first innovative drug, Dacinib, went on sale in March 2024, and we expect peak sales to exceed 1 billion yuan. The company's other innovative drug projects are also progressing smoothly. JX11502MA capsules have entered the IIb clinical phase, and phase IIa rehabilitation enteric capsules have been completed. As the company's innovative varieties gradually materialize, it is expected that it will continue to provide an increase in the company's performance.
Profit forecasts and investment advice
We forecast the company's revenue for 2024/2025/2026 to be 44.60/49.12/5.353 billion yuan, an increase of 11.54%/10.12%/8.99% year-on-year. Net profit attributable to mother was 728/8.41/941 million yuan, up 17.66%/15.54%/11.84% year-on-year. Corresponding current PE is 13/11/10X. Considering the impact of the company's in-hospital collection, there is plenty of room for improvement in the out-of-hospital market, innovative drugs continue to be provided in incremental quantities, and the “buy” rating is maintained.
Risk warning
Risk of changes in industry policies; drug development and marketing falling short of expectations; environmental risks; product sales falling short of expectations.