Incident: Ma Yinglong released the 2023 annual report. In 2023, the company achieved revenue of 3.14 billion yuan, a year-on-year decrease of 11.2%; realized net profit of 4.4 billion yuan, a year-on-year decrease of 7.4%; and realized net profit deducted from non-mother of 350 million yuan, a year-on-year decrease of 23.6%.

The pharmaceutical industry's revenue declined significantly year-on-year due to channel adjustments, channel inventory optimization, etc. In 2023, the company's revenue was 3.14 billion yuan (-11.2%), achieving net profit of 4.4 billion yuan (-7.4%); Q4 achieved operating income of 690 million yuan (-7.6%), and realized net profit of 24.87 million yuan (-60.2%), mainly due to the impact of the Q4 pharmaceutical industry adjusting channels and actively optimizing channel inventory. At the same time, Q4 sales expenses and related remuneration settlements were more concentrated than Q1-3, and the profit side was clearly under pressure. In 2023, the company's main business revenue of the pharmaceutical industry was 1.83 billion yuan (-11.5%), mainly due to the optimization of the inventory structure and control channel order on the industrial side.

Channel management has achieved remarkable results. As of the end of 2023, the amount of accounts receivable and notes receivable of the parent company decreased by 35.8% compared to the beginning of the year, and the inventory amount decreased by 22.4%. The 2023Q4 company's operating activities generated a net cash flow of 530 million yuan. The large amount was mainly due to the company strengthening cash flow management, implementing a pressure reduction of two funds, further increasing cash repayment efforts, and recovering some large deposit books at maturity.

Anorectal specialist hospitals are operating steadily, and the joint construction of anorectal diagnosis and treatment centers is expected to bring new growth. As of March 2022, Ma Yinglong has 6 direct-run anorectal specialist hospitals. The overall scale is among the leading domestic anorectal hospital chains. In 2023, the company continued to improve the operating quality of direct-run hospitals, and the profitability of directly managed hospitals was improved. Meanwhile, as of 2023, the company had signed a total of 80 anorectal diagnosis and treatment center co-construction projects, adding 18 new ones during the year, providing a full range of services for county-level hospitals in areas such as standardization of anorectal specialty, technical system training and specifications for difficult diseases. It is expected that with the gradual expansion of the company's joint construction of anorectal diagnosis and treatment centers, the company's medical service sector is expected to maintain steady growth.

The pharmaceutical business continues to explore new models, and the business structure continues to be optimized. The pharmaceutical commercial business is the company's traditional business. In 2023, the business structure was continuously optimized to achieve revenue of 1.09 billion yuan (-19.7%). Currently, the company's pharmaceutical business segment integrates offline physical pharmacies, online pharmacies, pharmaceutical logistics and other businesses, transforming and upgrading from traditional drug manufacturers to anorectal health solution providers to promote online and offline omni-channel operations.

Profit forecasting and investment advice. The company's revenue for 2024-2026 is estimated to be 3.24 billion yuan, 3.5 billion yuan and 3.86 billion yuan, respectively, net profit to mother of 510 million yuan, 590 million yuan and 700 million yuan respectively, and EPS of 1.17 yuan, 1.36 yuan and 1.62 yuan respectively, corresponding to PE of 21 times, 18 times and 15 times, respectively. Optimistic about the long-term development of the company. Coverage for the first time. Active attention is recommended.

Risk warning: the risk of raw material prices or large fluctuations; the risk of price increases falling short of expectations; competition increases the risk.