occurrences
Liberal Arts Biotech Co., Ltd. released its 2023 annual report: achieved revenue of 2,652 billion yuan in 2023, down 3.87% year on year; realized net profit of 237 million yuan, down 45.06% year on year; net profit after deducting non-return to mother was 143 million yuan, down 63.51% year on year; net cash flow from operating activities was 642 million yuan, up 7.59% year on year.
Key points of investment
The blood products business maintained steady growth, and impairment of goodwill affected apparent profits
The company achieved revenue of 2,652 billion yuan in 2023, a year-on-year decrease of 3.87%, and net profit to mother of 237 million yuan, a year-on-year decrease of 45.06%, mainly due to goodwill impairment preparations of 298 million yuan formed by the acquisition of Nanjing Xinbai Pharmaceutical. By business, the company's main business, blood products, maintained steady growth. In 2023, it achieved revenue of 1,461 billion yuan, up 8.87% year on year, and achieved net profit of 542 million yuan, up 8.91% year on year; diabetes, biochemical pharmaceuticals, etc. experienced a year-on-year decline in performance due to market price changes, procurement and health insurance policies, and equity transfers.
The non-blood products business was divested, focusing on the main business to achieve breakthroughs, and the new pulp station continued to expand steadily
The company continued to optimize its business layout, transferring 75% of its shares in Fuda Pharmaceutical and 89.681% of Tianan Pharmaceutical's shares in September and October 2023, respectively, and gradually completed the divestment of the two non-blood businesses. In 2023, the company further improved the operation and management level and efficiency of the pulp station. The annual pulping was 467.3 tons, an increase of 6.47% over the previous year. The output value of tons of slurry and gross profit per ton of slurry have always been at the forefront of the industry. The company currently has 16 single plasma collection stations, including 14 plasma stations. In 2023, it has obtained 2 new provincial approvals from Taihe County and Leping City. The new pulp station continues to expand steadily, promoting the continuous increase in slurry volume.
The research pipeline is rich. The first domestic company to receive clinical approval for C1 esterase inhibitors continues to increase investment in R&D. The R&D investment amount in 2023 was 103 million yuan, an increase of 33.77% over the previous year. The company continues to enrich its research pipeline. In the blood product pipeline, intravenous human immunoglobulin (IVIG) (10%) has completed a clinical summary report and applied for production approval; vascular hemophilia factor (vWF) research and development has carried out clinical case subjects; C1 esterase inhibitors have been approved and patented, making it the first domestic enterprise to obtain clinical approval. The company has built an innovative platform and signed a strategic cooperation agreement with the Institute of Blood Transfusion of the Chinese Academy of Medical Sciences to advance research directions in the field of small nucleic acids, gene therapy, and immunotherapy.
Profit forecasting
Recommended logic: (1) The blood products business maintains steady growth, the company's product structure is balanced, production and sales are always at the top of the industry; (2) gradually complete the divestment of the non-blood business, focusing on achieving breakthroughs in the blood products business. As the company continues to expand its pulp stations, pulp collection volume will also steadily expand; (3) The company has rich research and pipeline, and intravenous human immunoglobulin (IVIG) is expected to contribute additional volume to the company's performance during the production phase.
We predict that the company's revenue for 2024-2026 will be 19.30, 20.79 billion yuan, and 2,244 billion yuan, EPS will be 1.09, 1.19, and 1.30 yuan, respectively. The current stock price corresponds to PE of 28.4, 26.2, and 23.9 times, respectively. This is the first coverage, giving it a “buy” investment rating.
Risk warning
The expansion of pulp collection and pulp stations fell short of expectations; sales of blood products fell short of expectations; policy risks in the pharmaceutical industry; and the risk of increased competition in the industry.