Matters:
The company announced its 2023 annual report, achieving revenue of 1,412 million yuan (+21.73%), net profit attributable to mother of 117 million yuan (+39.71%), and net profit of 123 million yuan (+124.62%) after deduction. The company's performance was generally in line with expectations.
The company announced its report for the first quarter of 2024, achieving revenue of 213 million yuan (+10.34%), net profit attributable to mother of 0.2 million yuan (+4.75%), and net profit of 20 million yuan (-4.21%) after deduction.
The 2023 profit distribution plan is: 2.5 yuan (tax included) for every 10 shares.
Ping An's point of view:
In 2023, the company's deducted non-net profit increased dramatically, and 24Q1 was temporarily dragged down by Jin Shuxi's collection. The growth rate of the company's net profit deducted in 2023 was higher than the net profit attributable to mother. The main reason was that the amount of government subsidies received in that year decreased by about 38 million compared to the same period last year, reflecting strong endogenous growth in the company. By sector, revenue from chemicals was 718 million yuan (+93%), of which sales of the core product Kailiwei increased by more than 200%; revenue from biopharmaceuticals was 671 million yuan (-13%), mainly affected by the collection of core products such as Jin Shuxi. We believe that Kim Soo-hee's procurement will also have a short-term adverse impact on the 2024Q1 performance, but considering that Kim Soo-hee's overall price reduction is moderate and has a stable price cycle of up to 4 years, the subsequent growth rate is expected to gradually resume. In terms of profitability, 2023 showed a trend of declining biopharmaceuticals and rising chemicals. The company's overall gross margin was 83.55% (-3.05 pp), mainly because the gross margin of biopharmaceuticals was higher than that of chemical drugs; the net margin was 9.72% (+2.77 pp), mainly due to a significant decrease in sales expenses and management expenses.
Cultivate interferon alpha-2 injections to complete the follow-up phase, and it is expected that NDA will be reported in Q2 or Q3 in '24. The company's core research project is developing integrated interferon alpha-2 injections to complete all testing, follow-up, and group release. According to the progress, we expect this product to be produced in Q2 or Q3 in 2024. The number of patients with chronic hepatitis B in China reached 20 million to 30 million, and there is a large market space for functional hepatitis B treatment. In terms of other products under development, the KW-045 project for herpetic angina in children and the KW-051 project to treat shingles are both in phase 2 clinical phase, and the company also obtained 2 clinical approvals in 2023.
Jin Shuxi collected and landed. Kailiwei released high-speed, long-acting interferon NDA is imminent, maintaining the “recommended” rating. Considering that there is some uncertainty about the amount of products collected and released in the short term, we adjusted the 2024-2025 net profit forecast to 146 million yuan and 200 million yuan (the original forecast was 170 million yuan and 228 million yuan). The company's net profit in 2026 is 268 million yuan, and the current stock price corresponds to 2024 PE 39 times. Considering Kailiwei's high-speed release and long-term interferon market potential, we maintain the “recommended” rating.
Risk warning. 1) R&D risk: The company's core R&D projects may fail or fall short of expectations. 2) Product release falls short of expectations: Due to factors such as collection, the company's product release may fall short of expectations. 3) Market development risk: Affected by factors such as policies and competitive patterns, the company's core product market development falls short of expectations.