The company recently released the 2023 annual performance report. In 2023, the company achieved operating income of 920 million yuan, a year-on-year increase of 6.15%, and achieved net profit of 150 million yuan, a year-on-year increase of 48.24%. The profit side growth was strong. “Su Ling” received medical insurance contract renewals and restrictions, contributing to the increase in performance. The results of innovative drugs will gradually be realized in the future, which is expected to help the company achieve strong growth and maintain the purchase rating.

Key points to support ratings

Profit-side growth is impressive, and “Su Ling” continues to grow. In 2023, the company achieved operating income of 920 million yuan, a year-on-year increase of 6.15%, achieved net profit of 150 million yuan, a year-on-year increase of 48.24%, and realized net profit deducted from non-return to mother of 127 million yuan, an increase of 42.51% over the previous year. Both the revenue side and profit side showed a growth trend. In particular, the profit side showed strong growth, mainly due to reduced income tax expenses and the increase in sales volume of “Suling”. “Su Ling” received medical insurance renewal and restrictions, the market access advantage was further expanded, and the company subsequently took a series of measures to improve drug accessibility, thereby achieving a relatively rapid release.

Innovative drug research and development progress is progressing in an orderly manner, and the company is showing a trend of innovation and transformation. The company is actively advancing its multi-project R&D pipeline. The self-developed innovative drug KC1036 is a multi-target receptor tyrosine kinase inhibitor. The first case of advanced esophageal squamous cell carcinoma phase III clinical study was completed in February 2024, which is expected to fill the clinical gaps in second-line and advanced esophageal squamous cell carcinoma patients. Jincao tablets are the first traditional Chinese medicine class 1.2 innovative drug developed with the “chronic pelvic pain as a sequelae of pelvic inflammatory disease”. Currently, phase III clinical research is progressing smoothly, and it is expected to fill the gap in treatment of this indication in China after marketing.

Broaden the market for key products and accelerate the R&D process. The company continues to seize the benefits of “Suling” medical insurance restrictions, accurately deliver the latest evidence-based medicine and PV research results to the clinical front line, continuously strengthen its differentiated advantages, and continue to strengthen the unique advantages of “close coverage” in the market segment. Furthermore, the company maintains high investment in R&D, improves R&D efficiency, and accelerates the pace of product launch. As future R&D results are gradually implemented, it is expected to bring new performance increases to the company.

valuations

Since the impact of the “Su Ling” medical insurance renewal and settlement limit was lower than our expectations, we lowered our profit expectations. We expect the company's net profit to be 150 million yuan, 177 million yuan, and 222 million yuan respectively, EPS 0.94 yuan, 1.11 yuan and 1.39 yuan respectively, PE 32.7 times, 27.6 times, and 22.1 times, respectively. The company's core products continue to be released, and the innovation pipeline has entered a critical phase. Therefore, we are optimistic about the company's long-term development and maintain the purchase rating.

The main risks faced by ratings

Market competition increases risks, new drug development progress falls short of expectations, and pharmaceutical industry policy risks.