Huadong Pharmaceutical achieved operating income of 40.624 billion yuan in 2023, an increase of 7.71% over the previous year, and achieved net profit of 2,839 billion yuan to mother, an increase of 13.59% over the previous year. The company's medical and aesthetic business has maintained rapid growth, and many innovative achievements in the pharmaceutical industry business have gradually been realized. Maintain a buy rating.
Key points to support ratings
Performance has maintained steady growth and continued investment in R&D. Huadong Pharmaceutical achieved operating income of 40.624 billion yuan in 2023, an increase of 7.71% year on year, achieved net profit of 2,839 billion yuan, an increase of 13.59% year on year, and realized net profit without deduction of 2,737 billion yuan, an increase of 13.55% over the previous year. The company's gross margin in 2023 was 32.40%, up 0.50pct year over year. Among them, the company achieved operating income of 10.230 billion yuan in a single quarter of 2023Q4, an increase of 3.79% over the previous year, and achieved net profit of 650 million yuan to mother, an increase of 25.51% over the previous year. The company's R&D expenses in 2023 were 1,271 billion yuan, accounting for 3.13% of revenue, an increase of 0.44pct over the previous year.
As of the release of the company's 2023 annual report, the company has a total of 111 pharmaceutical research projects, including 73 innovative products and biosimilar projects.
The performance of the pharmaceutical industry sector grew steadily, and innovative achievements were gradually realized. The company's pharmaceutical industry sector achieved operating income of 12.217 billion yuan in 2023, an increase of 9.45 percent over the previous year, and realized net profit of 2.33 billion yuan to mother, an increase of 9.63% over the previous year. In 2023, the company will continue to be deeply involved in the three major treatment fields of endocrinology, autoimmunity and cancer, developing drug types covering small molecules, monoclonal antibodies, polypeptides, ADCs, etc. In 2023, the company's liraglutide injections were approved for sale for diabetes, obesity, or overweight, all of which were the first in China. At the same time, the company submitted marketing applications for a number of major innovative products: somituximab injection, the world's first ADC drug, was accepted in October 2023; the first domestic BLA was submitted and accepted for the treatment of plaque psoriasis; the marketing application for injectable linacipin for the treatment of cyclic syndrome and recurrent pericarditis was also accepted by the NMPA.
The medical and aesthetic business continues to grow rapidly, and the medical and aesthetic product matrix continues to expand. The company's medical and aesthetic business achieved revenue of 2,447 billion yuan in 2023 (excluding internal offsetting factors), an increase of 27.79% over the previous year. The wholly-owned subsidiary Sinclair in the UK achieved sales revenue of £149.58 million (approximately RMB 1,304 billion) in 2023, an increase of 14.49% year over year, and achieved annual profit for the first time since the company was acquired. The company's domestic wholly-owned subsidiary Hinkley Aesthetics achieved revenue of 1,051 billion yuan in 2023, an increase of 67.83% over the previous year, and continued to grow rapidly. The company's medical and aesthetic business matrix continues to expand. Globally, it already has 38 high-end products in the “non-invasive+minimally invasive” medical and aesthetic field, of which 24 have been marketed. The company's product portfolio covers improving lines between eyebrows, facial and full body injection filling, energy source skin care, and body contouring.
valuations
The company's R&D investment continues to grow, and the company's profit expectations are adjusted according to the company's performance. The company's net profit for 2024, 2025 and 2026 is expected to be 3.447 billion yuan, 4.113 billion yuan, and 4.975 billion yuan, respectively, and the corresponding EPS is 1.96 yuan, 2.34 yuan and 2.84 yuan, respectively. According to the April 17, 2024 stock price, the corresponding price-earnings ratio is 15.3 times, 12.8 times, and 10.6 times, respectively. (Previously, in October 2023, the company expected net profit to be 3,559 billion yuan and 4.176 billion yuan for 2024 and 2025, respectively, and EPS of 2.03 yuan and 2.38 yuan, respectively.) The company's innovative achievements in the industrial sector have gradually been realized, and the medical and aesthetic business has maintained rapid growth and maintained its purchase rating.
The main risks faced by ratings
Product development falls short of expectations; exchange rate fluctuations; risk of sales falling short of expectations; risk of price reduction in health insurance negotiations, etc.