Incidents:
The company released its 2023 annual report. In 2023, the company achieved operating income of 3.340 billion yuan, a year-on-year increase of 3.07%, net profit to mother of 489 million yuan, an increase of 11.36% year-on-year, and net profit after deducting non-return to mother of 477 million yuan, an increase of 15.23% year-on-year.
Comment:
Q4 Revenue growth is slowing, and the impact of harvesting is expected to clear up within 2024. 2023Q4 revenue increased 0.34% year over year, up 5.28% month on month, and net profit to mother increased 1.87% year over year in 2023Q4, down 15.50% month on month. We determined that it was mainly because the company's main product, losartan potassium hydrochlorothiazide tablets, did not win the bid for the eighth batch. After the eighth batch of collection began, Q3-4 in-hospital sales were affected, and the impact is expected to clear up within 2024.
Currently, only 3 varieties of compound α-ketoacid tablets, piveronium bromide tablets, and progesterone softgels have not been collected, and the current competitive pattern is good, and the current competitive pattern is good and the collection conditions are not yet in place. At the same time, several of the company's new first imitation products are expected to continue to contribute to revenue growth. Dagliflozin tablets, betaquiline fumarate tablets, tedizolamide phosphate tablets, saxagliptin metformin sustained-release tablets, fusidic acid cream, and ezetimibe simvastatin tablets have not contributed to revenue, which is expected to drive rapid growth in formulation revenue in the coming year.
The growth rate of the main business is steady, and the net interest rate continues to improve. By sector, annual pharmaceutical revenue was 3,091 billion yuan, up 2.00% year on year, gross margin was 68.35%, down 1.52 pp year on year; medical device revenue was 233 million yuan, up 17.88% year on year, and gross margin was 46.48%, up 1.58 pp year on year. The revenue growth rate of the main business is steady, and the gross margin of pharmaceutical preparations has declined due to the impact of price reductions in drug collection. The company's net interest rate continued to improve and profitability continued to increase. Affected by the fact that the sales expenses rate continued to fall to 36.4% in 2023, the company's annual net interest rate was 14.74%, an increase of 1.19pp over the previous year.
Investment in R&D has increased, and stocks of varieties under development are abundant. In 2023, the company's R&D expenditure rate was 10.6%, up 3.2pp year on year, and the absolute figure was 353 million yuan, up 47.38% year on year. By the end of 2023, the company had 70 generic drug formulation research projects, innovative drugs focused on nucleic acid drug research and development, and 4 medical device research projects. It is expected that 6-8 varieties will be approved for listing every year in the next two years, and guaranteed revenue will grow rapidly.
The dividend ratio has increased, and investors continue to be rewarded. In 2023, the company paid a cash dividend of 5.00 yuan for every 10 shares, an increase of 0.1 yuan/share over the same period last year. The cash dividend ratio was 48.08%, an increase of 4.29pp over the previous year.
Profit forecasts and investment advice
We forecast the company's revenue for 2024/2025/2026 to be 36.61/40.91/4 674 billion yuan, an increase of 9.62%/11.73%/14.27% year-on-year. Net profit attributable to mother was 564/ 685/801 million yuan, up 15.30%/21.61%/16.92% year over year. Corresponding current PE is 13/10/9X. Considering that the company has a rich research pipeline and a good competitive pattern of stock varieties, the continued increase in the contribution of new varieties is expected to drive a steady increase in the company's revenue and maintain a “buy” rating.
Risk warning
Market competition increases risk; risk of losing bid in volume procurement; risk of product development failure.