Incident: The company released its 2023 annual report, achieving operating income of 10.012 billion yuan (+7.87%), net profit of 654 million yuan (+30.78%), and net profit of non-return to mother of 619 million yuan (+23.20%). On a quarterly basis, Q4 achieved operating income of 2,695 million yuan, net profit of 75 million yuan (-8.87%), net profit after deducting non-return to mother of 0.64 million yuan (-9.74%). Sales expenses and R&D expenses increased in the fourth quarter. At the same time, the company calculated asset impairment losses of 32.54 million yuan and credit impairment losses of 74.61 million yuan, which had a significant impact on profit in the fourth quarter.
The gross margin of the main business increased, and the focus was on business convergence. The company focuses on developing manufacturing products in medical devices, pharmaceutical equipment and other sectors. In 2023, the share of medical device manufacturing products and pharmaceutical equipment products in the main business revenue increased to 61.5%, an increase of 2.5 pcts over the previous year. We believe that driven by product structure optimization and strategies to improve quality and efficiency, the company's gross margin continued to increase. The gross margin in 2023 was 27.37%, an increase of 0.93 pcts over the previous year. In addition, the company achieved a breakthrough in international business. The relevant revenue in 2023 was 241 million yuan (+55.36%), while the gross margin of the international business was far higher than the gross margin level of the domestic business. The company's work to clean up inefficient and invalid assets continues. In 2023, it listed and sold shares in Hubei Jia Yanrong Biology, Xiangyin Leger Biology Department, and Yongzhou Xiaoxiang Chronic Disease Hospital. We believe the company's business will be further focused in the future.
Medical device sector: Achieved revenue of 4.167 billion yuan in 2023, an increase of 9.15% over the previous year. Main business aspects: sensory control is active in the field of endoscopy, actively promoting the overall solutions of intelligent endoscopy centers; key progress has been made in many national-level R&D projects for radiology diagnosis and treatment; clean surgery focuses on minimally invasive endoscopy, and plans to develop new products supporting equipment and consumables for minimally invasive products; experimental animal equipment has made significant breakthroughs in the biosafety market, increasing the annual contract amount by 72.80%; and in vitro diagnosis has obtained several new product registration certificates.
Pharmaceutical equipment sector: Achieved revenue of 1.923 billion yuan in 2023, an increase of 26.73% over the previous year. The company focused on complementing the overall solution for small-volume injections, mainly BFS equipment, which enhanced the company's comprehensive competitiveness in the field of small-volume injections; the successful launch of double-membrane high-speed continuous BFS equipment with completely independent intellectual property rights opened a new breakthrough for the company to enter the medical and aesthetic field; the number of new contracts signed in the international market increased significantly compared to the same period last year. Chengdu Yingde, a core biopharmaceutical equipment subsidiary, achieved a net profit of 22.9 million yuan in 2023. The profit margin was basically the same as in 2022, shortening the chromatographic purification equipment development cycle through the introduction of talents.
Profit forecast: We expect the company's net profit to be 818 million yuan, 976 million yuan and 1,124 million yuan in 2024-2026, up 25.0%, 19.4%, and 15.1% year-on-year respectively. We believe that the company will benefit from new pharmaceutical infrastructure and the incremental demand in the pharmaceutical machinery industry. In the future, the two major sectors of medical devices and pharmaceutical equipment will develop rapidly, and product upgrades and structural optimization are expected to further enhance the company's profitability. Referring to comparable companies, we will give the company 14-18X PE in 2024, corresponding to a reasonable value range of 24.53-31.53 yuan, and continue to maintain the “superior to the market” rating.
Risk warning: New orders fall short of expectations; market competition increases risk; policy regulation risk.