Key points of investment
Incident: Kangyuan Pharmaceutical released its 2024 quarterly report. During the reporting period, it achieved revenue of 1,359 million yuan (YoY +0.48%), net profit of 148 million yuan (YoY +4.67%), and net profit of 140 million yuan (YoY +0.20%). The performance was in line with expectations under a relatively high base.
Oral liquid and gel products performed well, mainly due to the year-on-year increase in sales of Jin Zhen's oral liquid and musculoskeletal pain relief gel. 24Q1 injection/oral liquid/capsule/granule/pill/patch/gel achieved revenue of 5.38/3.70/1.97/1.05/0.82/0.51/0.09 billion, -8.87%/+30.24%/-4.88%/-15.40%/+1.84%/-13.10%/+260.97%; total revenue for non-injectable products was 821 million yuan, +7.73% YoY.
The level of profit is generally stable. The gross margin of 24Q1 was 74.61% (-0.49pct), and the gross margin of injection/oral liquid/capsule/granule/pill/patch/gel was 71.60%/89.51%/78.08%/74.42%/78.91%/86.05%, respectively, -2.09/-1.05/+2.86/-2.78/-2.78/-4.60/-0.34pct, respectively. Sales/management/R&D expenses were 37.44%/8.57%/15.02%, respectively, -6.52/+4.51/+1.08pct. Among them, management expenses increased by 111.89% year on year, mainly due to the company's increased investment in talent and development of management-related activities on the basis of personnel structure adjustments. The net profit margin after deduction was 10.28%, -0.03pct year over year.
Operational efficiency continues to improve. The number of accounts receivable turnover days in 24Q1 was 44.67 days, an improvement of 3.28 days over the previous year. Net cash flow from operating activities was $199 million, compared to -61 million yuan in the same period last year, mainly due to high cash repayments in the current period.
Maintain a “buy” rating. The estimated net profit for 2024-2026 is 6.18/7.28/857 million yuan, up 15.18%/17.77%/17.67% year-on-year, and EPS is 1.06/1.25/1.47 yuan, corresponding to PE20.09x/17.06x/14.50x. Considering that the company has strong R&D strength and channel vitality given by marketing reforms, it maintains a “buy” rating.
Risk warning: R&D innovation risk, policy adjustment risk, cost fluctuation risk