1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of HK$1,799 million, up 2.9% year on year (about 6.7% in RMB); net profit to mother of HK$416 million, corresponding to earnings per share of HK$0.14, up 14.6% year on year (approximately 19.0% in RMB), in line with our expectations.
Development trends
In the first quarter of 2024, intravenous infusion sales revenue increased 1.3% year over year to HK$1,065 million.
In the first quarter of 2024, revenue from non-PVC soft pouch infusion, PP plastic bottle infusion, and glass bottle infusion products was -10.3%, +48.2%, +0.4%, and -26.5% year-on-year, to $521 million, $272 million, HK$228 million and HK$44 million, respectively. In 2024, the company is expected to promote production infrastructure projects such as vertical soft bag infusion production lines and plastic ampoule production lines in an integrated manner. Furthermore, we expect the company to continue to promote market development of new products such as propofol and medium chain fatty milk, resorcinol injections, adrenaline injections, and aminophylline injections this year.
Non-infusion products have maintained a steady trend. In the first quarter of 2024, 1) The company's ampoules were +5.0% to HK$280 million compared to HK$280 million. We expect the company to continue to explore the market potential of large varieties such as bromhexine and doxophylline this year. 2) The API sector's revenue was +5.9% year-on-year to HK$234 million. We expect the company to continue to improve its product structure and accelerate the implementation and transformation of new products with high added value. 3) Revenue in the oral formulation segment was -0.4% year-on-year to HK$147 million. We expect the company to accelerate the optimization and upgrading of the production and marketing structure.
4) Medical materials +8.0% YoY sales were HK$47 million.
The net profit margin increased year over year. In the first quarter of 2024, the company's comprehensive gross margin was 57.3%, down 0.3 percentage points from the previous year; the company's comprehensive net margin was 23.1%, an increase of 2.4 percentage points over the previous year, mainly due to further optimization of the expense ratio.
Profit forecasting and valuation
We maintain our 2024/2025 revenue and net profit forecasts unchanged. The current stock price corresponds to 8.5 times the 2024 price-earnings ratio and 7.3 times the 2025 price-earnings ratio. We maintain a “outperforming industry” rating and maintain a target price of HK$6.10, which corresponds to 11.1 times the price-earnings ratio of 2024 and 9.4 times the price-earnings ratio of 2025. There is 30.3% upside compared to the current stock price.
risks
Sales of new products declined, and collection results fell short of expectations.