Key points of investment
Incident: Pien Tsai released the 2023 Annual Report and the 2024 Quarterly Report, achieving revenue of 10.058 billion yuan (YoY +15.69%), net profit attributable to the mother of 23 billion yuan (+13.15% YoY), and net profit of 2,854 billion yuan (YoY +15.26%); of these, 23Q4 achieved revenue of 2,459 million yuan (YoY +18.30%) and net profit of 393 million yuan (-6.47% YoY), net profit of 413 million yuan (YoY -0.31%). 24Q1 achieved revenue of 3.171 billion yuan (YoY +20.58%), net profit to mother of 975 million yuan (YoY +26.61%), and net profit of non-return to mother of 988 million yuan (YoY +28.23%); the results were in line with expectations.
Strengthen marketing initiatives, improve movies, develop strong varieties, and expand cosmetics. By product, liver disease/cardiovascular medication/other medication/cosmetics industry/pharmaceutical distribution/other 23 years achieved revenue of 44.63/2.66/0.73/7.07/42.05/323 billion yuan, +24.26%/+60.57%/+30.97%/+11.42%/+3.60%/+91.51%; 24Q1 achieved revenue of 15.05/1.17/0.31/2.00/12.54/0.56 billion yuan, respectively, +27.84%/-3.23% YoY /+115.25%/+83.18%/+12.86%/-41.01%. The sales volume for liver disease/cardiovascular drugs/other drugs in 23 years was 453.45/104.49/10.122 million boxes, respectively, an increase of 34.02%/28.71%/12.62% over the previous year.
Profitability has been rising steadily. The net interest rates for non-return mother deducted in '23 and 24Q1 were 28.37%/31.17%, respectively, -0.11/+1.86pct year-on-year. The company's gross margin in '23 was 46.76%, +1.12pct; by product, liver disease/cardiovascular medication/other medication/cosmetics industry/pharmaceutical distribution/other gross margins were 78.79%/38.71%/25.96%/62.18%/13.85%/11.93% year-on-year, -2.11/-8.44/-4.96/+1.58/+0.07/+2.17pct; sales/management/R&D expense rates were 7.78%/3.65%/2.31% yoy, respectively /-0.16/ -0.34pct 24Q1's gross margin was 47.26%, year-on-year -1.04pct; by product, liver disease/cardiovascular medication/other medication/cosmetics industry/pharmaceutical distribution/other gross margins were 75.75%/16.02%/21.62%/68.26%/14.65%/16.81%, year-on-year, -4.47/ -25.98/-25.88/+7.59/-2.73/6.97pct; sales/management/R&D expense ratios were 5.20%/2.42%/2.80%, respectively 0.30/-1.38/ -0.73pct
Operational capacity improved month-on-month. 24Q1 The company's accounts receivable turnover was 25.56 days, an improvement of 4.08 days over the previous month; the cash/operating income received from sales of goods and services was 116.15%, which we expect to be due to accounts receivable repayment. The company's weighted average ROE in '23 was 22.64%, -0.86pct year over year.
Maintain a “buy” rating. We expect net profit from 2024-2026 to be 33.08/36.78/4.284 billion yuan, an increase of 18.26%/11.17%/16.48% year-on-year, and EPS of 5.48/6.10/7.10 yuan, corresponding to PE41.22x/37.08x/31.83x. Considering that the company is a leader in famous traditional Chinese medicine, the core products have the ability to rise rapidly in volume and price, maintaining a “buy” rating.
Risk warning: risk of policy adjustments, risk of cost fluctuations, cross-regional expansion falling short of expectations