occurrences
The company released its 2023 annual report, achieving operating income of 17.861 billion yuan, +16.19% year-on-year; net profit to mother of 1,669 billion yuan, +16.92% year-on-year; net profit after deducting non-return to mother of 1,657 billion yuan, +18.32% year-on-year.
Analytical reviews
The annual performance was stable, and Q4 results were slightly under pressure
Looking at a single quarter, the company's 2023Q4 revenue was 4.140 billion yuan, -7.44% year over year; net profit to mother was 278 million yuan, -34.47% year over year; net profit without return to mother was 279 million yuan, or -31.83% year over year. The Q4 results in '22 were high, and 23Q4 performance was under short-term pressure.
For the whole of 2023, the company's gross sales margin was 47.29%, -1.51 percentage points; the net sales margin was 14.46%, +0.15 percentage points; the sales expense ratio was 19.24%, -0.74 percentage points; the management expense ratio was 8.53%, -0.20 percentage points; the R&D expense ratio was 1.57%, +0.16 percentage points; the financial expense ratio was -0.62%, -0.59 percentage points year on year; the net operating cash flow was 1,869 billion yuan, y-39.58 percentage points year on year %. The company's expense ratio continues to be optimized, and the rise in raw material prices affects the company's overall gross profit margin.
The parent company and the three major subsidiaries are developing steadily
According to the parent company's statement, revenue was 4.109 billion yuan, up 11.21% year on year, and net profit to mother was 1,249 billion yuan, up 14.49% year on year.
The subsidiaries Tong Ren Tang Technology, Tong Ren Tang Sinopharm and Tong Ren Tang have developed steadily.
Tongrentang Technology: Achieved operating income of 6.773 billion yuan, an increase of 13.04% year on year, and net profit of 992 million yuan, a year-on-year decrease of 0.93%.
Tongrentang Sinopharm achieved operating income of 1,377 billion yuan, a year-on-year decrease of 7.94%, and net profit of 532 million yuan, a year-on-year decrease of 10.78%. For overseas markets, Tongrentang Sinopharm is based on key markets in Hong Kong and Macao, actively carries out multi-channel development and promotion, accurately invests marketing resources for large products, and continuously optimizes the layout of core market terminals.
Tong Ren Tang Commercial: Achieved operating income of 10.345 billion yuan, a year-on-year increase of 20.94%, and net profit of 550 million yuan, an increase of 51.97% over the previous year. By the end of 2023, Tong Ren Tang Commercial had 1001 stores, including 59 new stores in 2023.
Core products are growing steadily, actively exploring scientific research, innovation and variety development, focusing on large variety strategies, and focusing on the steady development of the main business. The top five series (Angong beef yellow series, Tongren Niuhuang Qingxin series, Wu Zi Yanzong series, Liuwei Dihuang series and Jin Qi series) had revenue of 4.953 billion yuan, up 9.97% year on year, gross margin of 54.82%, a year-on-year decrease of 5.44 percentage points. The annual sales volume of its central cerebrovascular products reached 16.4871,000 boxes, a year-on-year decrease of 0.94%; the annual sales volume of supplement products reached 36.1189 million boxes, an increase of 24.16% year on year. The company continues to follow up the work of adding large varieties and strengthen the promotion of varieties.
The company continues to promote product development and transformation. In '23, the company increased the establishment of scientific research projects, carried out research and development work on classic famous recipes, Qingnao Xuanjiao Dipping pills, carried out secondary development of key varieties such as Tongren Niuhuang Qingxin Pills, etc.; carried out exploratory research on potential varieties to explore variety value; completed research on internal control standards such as Sichuan beef knee to address production quality issues; and laid out and solved endangered rare herbal medicine resources in advance.
Investment advice
The company's 23-year performance is in line with expectations. The core products continue to develop. In terms of revenue, we have maintained our previous forecast and added a 26-year forecast. The company's revenue for 2024-2026 is 200.9/223.6/25.62 billion yuan, respectively, up 13%/11%/15% year on year. In terms of profit, considering the impact of cost growth due to rising raw material prices on gross margin, we lowered our previous forecast. The company's net profit for 2024-2026 is 20.0/23.6/2.78 billion yuan, respectively (24 The original forecast for -25 was 21.6/2.48 billion yuan), with year-on-year increases of 20%/18%/18%, respectively, and the corresponding valuation was 28X/24X/20X. We are optimistic about the company's long-term future development and maintain a “buy” rating.
Risk warning
Prices of raw materials fluctuate; increased sales of core varieties fell short of expectations; marketing reforms fell short of expectations.