Matters:
Recently, the company disclosed its 2023 annual report. The company's revenue for the year 2023 was 3.075 billion yuan (+10.7%), or 1.17 billion yuan (-26.2%), deducted 1.17 billion yuan (+38.9%); revenue for the fourth quarter was 980 million yuan (+44.8%), the mother was 410 million yuan (+127.6%), after deducting not 400 million yuan (+128.3%). The results were basically consistent with the previously disclosed performance report. The fourth quarter results greatly exceeded expectations.
Commentary:
Sales of second-generation insulin grew steadily, and third-generation insulin was released rapidly. In 2023, the company sold 83.22 million units of insulin (+12.8%). According to Pharmaceutical Rubik's Cube data, the company's second-generation insulin market share exceeded 40% in 2023, ranking first in the industry. The sixth batch of special national insulin collection has been carried out in various provinces since May '22. It is currently close to the two-year standard period. It is expected that the 24Q2 Health Insurance Administration will organize the renewal process. The company's Mendong series failed to obtain collection targets in the first round of collection due to its late launch. If the Mendong series successfully wins the bid, it is expected that collection will be used to speed up hospital access and achieve rapid release.
The R&D pipeline is progressing efficiently, and new products will be launched in the future. 1) Insulin pipeline. The company's speeding effect is progressing steadily, and the company is developing a new generation of basic insulin weekly formulations; 2) The GLP-1 pipeline, oral small molecule THDBH110, and GLP-1/GIP dual-target THDBH120 have all completed the first phase I clinical trial to enroll subjects. In addition, the clinical application for injectable THDBH120 weight loss was accepted; 3) The phase IIa clinical trial of the URAT1 inhibitor (THDBH130 tablets) reached the main end point; it is expected to become FIC's XO/URAT1 dual target (THDBH151 tablets) phase I clinical trial.
The company's internationalization process is accelerating. 1) Recombinant human insulin is expected to be approved by the European Medicines Agency in 2024. 2) Insulin glycine has prepared registration data and applied for insulin in many developing countries, and has also completed preliminary preparations for the registration application of insulin in developing countries. 3) In terms of liraglutide, the company and Kexon Pharmaceuticals are planning to develop 17 overseas emerging markets. 4) Cooperate with Jianyou on the three products of glycine, mentong, and laipong to enter the US insulin market. It is expected that 24H2-25H1 will be declared for listing by the FDA one after another, and will be approved for marketing in '26.
Investment advice: Since insulin renewals have not yet been implemented, there is still some uncertainty about the company's future performance. We are based on the following assumptions: 1) Dongbao's full range of product renewal pricing is in Group A price line, and the collection contract volume continues to grow steadily; 2) channel gaps caused by product price cuts, reducing 24Q2 revenue and profit; 3) gross margin of collected varieties declined slightly due to price reductions; 4) Continued harvesting contracts began to be implemented one after another from 2024Q2, so there are still high price base issues in some quarters of '25. Both have been downgraded. We expect the company's net profit to be 12.5, 13.8, and 1.59 billion yuan in 24-26 (the original 24-25 forecast values were 12.1 billion yuan and 1.45 billion yuan), up 7%, 11%, and 16% year-on-year. The current stock price corresponds to PE 16, 14, and 12 times. Based on DCF model estimates, we expect a reasonable stock price of $14.6 in 2024, maintaining a “strong” rating.
Risk warning: 1. Special insulin collection renewal and price reduction; 2. The competitive pattern in the insulin industry worsens; 3. The development progress of some products is lagging behind.