Incidents:
The company released its 2023 annual report, which achieved revenue of 8.674 billion yuan (yoy +0.42%) and net profit of 1,071 billion yuan for the full year of 2023, mainly due to losses due to changes in the fair value of financial assets during the reporting period being lower than the previous year, after deducting net profit of 1,181 billion yuan (yoy +60.11%). In the Q4 quarter, the company achieved revenue of 2.03 billion yuan (yoy -15.64%), net profit attributable to mother of 39 million yuan (yoy -50.44%), and net profit of 127 million yuan after deducting non-return to mother.
The pharmaceutical industry is growing steadily, and the quality of operations continues to improve
In 2023, the pharmaceutical industry achieved revenue of 7.421 billion yuan (yoy +3.22%), gross profit margin of 72.96% (yoy+1.85pct), of which the traditional Chinese medicine business achieved revenue of 5.971 billion yuan (yoy +6.62%), gross profit margin of 72.24% (yoy+2.36pct), and the main cardiovascular products achieved revenue of 5.254 billion yuan (yoy +3.45%), gross profit margin of 74.93% (yoy+2.18pct). The pharmaceutical business achieved revenue of 1,215 billion yuan (yoy -14.21%), gross profit margin of 29.54% (yoy+2.29pct), and operating costs decreased by 16.92% compared to the same period last year.
Continue to step up R&D efforts to achieve collaborative development of traditional Chinese medicine, chemical medicine and biopharmaceuticals to invest 1,315 billion yuan in R&D throughout 2023, an increase of 29.49% over the same period last year. The company has 98 products in the research pipeline, of which modern traditional Chinese medicine, biological medicine and chemical medicine have 25, 12, and 59 products respectively. Of the 41 Class 1 innovative drug pipelines, 26 have entered clinical phase II/III, and many other products have submitted applications for marketing and consistency evaluation. The company continues to promote real-world research and evidence-based medical research. During the reporting period, 10 new varieties were added to 23 guidelines and agreements.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 revenue to be 96.50/104.86/11.160 billion yuan respectively, with year-on-year growth rates of 11.25%/8.66%/6.43%; net profit to mother of 13.37/14.52/ 1,534 billion yuan respectively, with year-on-year growth rates of 24.87%/8.58%/5.60%, EPS 0.90/0.97/1.03 yuan/share, respectively, corresponding PE 17/15/15 times. In view of the fact that the company is a leading innovator in modern traditional Chinese medicine, and has abundant product pipelines under development. Referring to the relative valuation of comparable companies, we gave the company 24 times PE in 2024, with a target price of 21.49 yuan, maintaining a “buy” rating.
Risk warning: pharmaceutical industry policy risk, R&D failure risk, raw material price risk, management risk, etc.