The company publishes its 2023 annual report. For the full year of 2023, the company achieved operating income of 5.52 billion yuan, a year-on-year increase of 1.4%; realized net profit of 1.03 billion yuan, an increase of 12.2% over the previous year; and net profit after deduction of 1.02 billion yuan, an increase of 10.5% over the previous year. In the fourth quarter, the company achieved operating income of 950 million yuan, a year-on-year decrease of 11.7%; net profit to mother was 66.49 million yuan, a year-on-year decrease of 62.6%; net profit after deduction from mother was 72.68 million yuan, a year-on-year decrease of 55.7%.
Revenue was basically in line with expectations, and the profit side was greatly affected by Q4: overall revenue was basically in line with expectations under pressure from the industry and declining APIs, and Q4 on the profit side was greatly affected. CDMO's business performance was outstanding, achieving a growth rate of nearly 20%.
The project pipeline continues to be rich, and the share of CDMO business has increased significantly: by the end of 2023, the company had undertaken 32 listed projects, 74 phase III clinical projects, and 902 phase I and phase II clinical trials. The increase in the number of projects at each stage continued to boost the steady growth of the company's business. From a business perspective, in 2023, the company's CDMO business achieved revenue of 4.08 billion yuan (+19.40%) and gross profit margin of 40.3% (+0.65pct), accounting for 73.9% (+11.2pcts, achieving continuous and rapid growth).
Ruihua's Zhongshan plant completed delivery in 2023H1, strengthened the company's formulation CDMO service system, and introduced more than 20 new customers during the year. In terms of peptide and coupling business, in 2023, the company successfully delivered the 10 million-grade polypeptide IND project and successfully signed a strategic cooperation agreement with the customer. In 2023, the company's API business achieved revenue of 1.26 billion (-22.95% YoY), accounting for 22.8%. By the end of '23, the company's formulation pipeline had a total of 17 projects, of which 3 had been approved and 6 had submitted listing applications. By region, in 2023, the company achieved domestic business revenue of 1.10 billion yuan (+7.0%), accounting for 20.3%, gross margin of 28.7% (-0.1 pct); achieved overseas business revenue of 4.31 billion yuan (+3.7% year over year), accounting for 79.7%, and gross margin of 40.8% (+2.7pcts).
Profitability is progressing steadily, and various expense ratios are well controlled: in 2023, the company achieved a gross sales margin of 37.7% (+3pcts), a net sales margin of 18.7% (+1.8pcts); a sales expense ratio of 1.5% (+0.4pct), a management expense ratio of 8.1% (+0.2pct), and a R&D expense ratio of 6.0% (+0.7pct). In terms of production capacity construction, the main construction of the Ruibo Taizhou (Phase 1) production workshop and supporting facilities has been completed. It is expected that some production lines will be put into use in 2024Q2; the Ruibo Suzhou pilot plant will be put into use; and Ruibo America has carried out the second phase of the pilot plant installation and design work.
Profit forecast adjustment: Based on the company's existing financial data in 2023, the API declined a lot. Currently, the CDMO industry is also affected by the collapse in investment and financing, so we have lowered the company's profit forecast for the next few years. The revenue side growth rate was adjusted to 10-15% in 2024. On the profit side, since the company's CDMO business grew faster than APIs, the profit margin still increased.
Profit forecast and rating: We lowered our profit forecast. The company's net profit for 2024-2026 is expected to be 1.21 billion yuan, 1.47 billion yuan, and 1.78 billion yuan respectively, up 17.3%, 21.4%, and 21.3% year-on-year; the corresponding PE is 13X, 10X, and 9X times, respectively, maintaining the “buy” rating.
Risk warning: The API industry's recovery falls short of the expected risk, and there is a risk that demand for pharmaceutical R&D will decline.