Incident: The company released its 2023 annual report. In 23, the company achieved operating income of 40.624 billion yuan/yoy +7.71%, and achieved net profit of 2,839 million yuan/yoy +13.59%; in Q4 alone, the company achieved operating income of 10.229 billion yuan/yoy +3.79%, and achieved net profit of 650 million yuan/yoy +25.51%.
The pharmaceutical sector is developing steadily, and the ability to contribute to medical and aesthetic profitability continues to improve. In 2023, the company's commercial/manufacturing/medical and aesthetic sector achieved revenue of 276.41/148.34/2,447 billion yuan respectively, up 7.53%/11.46%/27.79% year on year; in the medical and aesthetic sector, domestic/overseas medical and aesthetic business achieved revenue of 1,328/1,304 billion yuan respectively, up 50.29%/14.00% year on year, and the medical and aesthetic business continued to grow rapidly. The company's gross margin in 2023 was 32.40% /yoy+0.50pct. Among them, commercial/manufacturing gross margin was 6.98%/77.85%, respectively, -0.31/+0.18pct. The increase in gross margin may stem from structural changes in gross margin due to the increase in the share of high-margin pharmaceutical manufacturing, medical and aesthetic sectors. The cost rate for the 2023 period was 23.11% /yoy+0.10pct (of which sales/management/ financial/ R&D expenses were -0.44/+0.18/-0.08/+0.43pct, respectively), and the net profit margin was 7.01% /yoy+0.29pct.
Domestic medical and aesthetic business: The pipeline coverage of injectable products is gradually being enriched, and EBD marketing is progressing steadily. ① Continuously strengthen brand building, and the influence and competitiveness of Yi Yeon's industry continues to improve.
In '23, Xinckley achieved revenue of 1,051 million yuan/yoy+ 67.83%, of which Q4 achieved revenue of 227 million yuan/yoy +22%, the core product, the number of hospitals officially cooperated by Yi Yan Shi, exceeded 600 (+100 at the end of '22), the number of trained and certified doctors exceeded 1100, and institutional coverage was effectively promoted. ② The EBD product organizational layout+listing process is progressing steadily. The radiofrequency therapy device Reaction was re-launched in China in June 2023, and can provide customized radiofrequency frequencies to meet the anti-aging needs of different levels of refinement; Cool Snow focuses on frozen skin care and has now cooperated with over 40 domestic beauty agencies; the registration application for the optical radiofrequency therapy device V20 has been accepted by the State Drug Administration and is expected to be approved for listing in China in 2024. ③ Injection pipelines continue to be enriched to achieve full coverage of the three major categories of regenerative, hyaluronic acid, and botulinum toxin.
In terms of botulism: Recombinant botulinum YY001 has completed the enrollment of phase III clinical subjects in China, and the marketing application for Korean botulism ATGC-110 has been accepted by the Ministry of Food and Drug Safety (MFDS) of Korea. In terms of hyaluronic acid: MaiLi Extreme is expected to submit a domestic registration application in 24Q2, and MaiLi Precise completed the enrollment of the first clinical trial subjects in December 23; in terms of regeneration: E-Yeonshi M successfully completed the enrollment of all subjects in the Chinese clinical trial in 23Q1 and began follow-up. It is expected that subsequent products will be launched to enrich the product positioning of Yiyanshi products.
Overseas medical and aesthetic business: Profitable for the first time, and we expect continued improvement in profitability. Sinclair achieved operating revenue of about 1,340 million yuan/yoy +14.49% (+11.15% without considering exchange rate factors). Sinclair achieved annual profit for the first time since the company was acquired (operating profit in 22 years), and its ability to contribute to profit is expected to continue to increase in the future.
Profit forecast: In 23 years, the company's core domestic medical and aesthetic product, Yiyanshi continued to increase profits, and the company's overall medical and aesthetic business's profitability continued to increase. In addition, liraglutide products for weight loss indications continued to be released, and it can be expected that they will make a better contribution to the company's revenue and profits in 24 years. We predict that the company's net profit for 2024-2026 will be 33.85/39.17/4.355 billion yuan, respectively, up 19.2%/15.7%/11.2% year-on-year, and corresponding PE is 16/14/13X, respectively.
Risk factors: R&D clinical progress falls short of expectations, marketing results fall short of expectations, and increased competition for medical and aesthetic products.